Older savers with modest balances face hardest hit from Rachel Reeves' Cash ISA changes

EXCLUSIVE

Older savers with modest balances will be hardest hit by Rachel Reeves proposed changes to the Cash ISA allowance, according to worrying new analysis of customer data by one of Britain's biggest building societies. These warn that mooted changes to the Cash ISA regime would have the biggest negative impact on ordinary savers, with older people left worse off and potentially pushed towards inappropriate higher-risk investments that could see their life-savings decimated.

Newcastle Building Society says there is a "misguided" assumption in Ms Reeves plans that Cash ISA savers could just as easily and comfortably invest in the stock market as save in a Cash ISA.

Proposed reforms being considered by the Chancellor are thought to include a reduction in the annual allowance from £20,000 to £4,000 as part of a government bid to encourage savers to put more money into Stocks and Shares savings accounts, to boost investment in UK companies.

But according to analysis of customer data, the UK's 7th largest building society says the typical Cash ISA customer is a modest saver, from a low-to-middle income household, who relies on traditional savings as they build towards, or manage their retirement.

And for this reason, they argue it would be inappropriate to push Cash ISA customers towards higher risk, longer term options, including more complex savings products. The Society's data reveals that its ISA customers are typically older or approaching retirement, with two-thirds (67%) over the age of 60, and around 50% beyond the state retirement age.

Of those aged over 60, almost half (45%) are likely to be living in down-sized accommodation, and those in the 45-54 age range are typically working families with moderate savings balances.

The vast majority (79%) of all Newcastle Building Society ISA customers have balances under £50,000, with many older savers managing on a budget, having placed their trust in accessible tax efficient savings in their later years.

Brian Stobbs and wife Kathryn, both 61, have been customers at Newcastle Building Society's branch in Consett, County Durham, for decades.

He said: "I've been a loyal Cash ISA saver since the 1990s, and am proud to say that in more recent years I've been able to make full use of my tax-free limit. My ISA provides the access and freedom myself and my wife Kathryn want to be able to enjoy our retirement on our terms.

"I'm not keen on risk and I don't want to be forced into a Stocks and Shares ISA where my money could be gambled on the markets, or feel like I'm bank-rolling the economy. Forcing me into a risky product undermines everything a Cash ISA stands for."

Andrew Haigh, chief executive at Newcastle Building Society, said: "Restricting Cash ISAs in the hope that savers will be enticed towards higher-risk products which may not be suited to their needs or risk appetite, could have serious negative consequences for many of our customers.

"There are some misguided assumptions about the people who choose to save their money in a Cash ISA that need to be corrected. Typical Cash ISA customers have relatively modest savings. And whilst few Cash ISA customers are unlikely to be able save to the annual ISA limit every year, many accumulate their ISA savings over time and rely on the higher limit for strategic planning - using windfall events such as inheritance, redundancy, or property downsizing to build a source of financial security and wellbeing in later years.

"This financial resilience demonstrates the success of the Cash ISA, and is exactly what policymakers should be encouraging, supporting healthy savings behaviour through advice and information rather than limiting choice and accessibility."

John Clayton, 63, lives in Wigton, Cumbria with his wife Vivien and uses Cash ISAs with Newcastle Building Society to help supplement their retirement income. John said: "As we're not yet old enough to receive our state pensions, the interest from our Cash ISAs is essential. We carefully manage our finances, and the certainty of a fixed return is important

to us.

"I think it's wrong that the Government is effectively nudging people toward the stock market. It's people's own hard-earned money and I believe that this decision should rest with them - not be influenced by Government policy that steers them down one route. It's insulting to people to take the choice away from them."