- Our survey of Cash ISA savers suggests only one in five would migrate to investing in the UK stock market if the Cash ISA allowance was reduced or abolished*
- Most Cash ISA savers (51%) would simply stick the money in a taxable savings account and only 20% would invest in UK stocks
- 24% would buy Premium Bonds or an NS&I product and 8% would buy crypto
- Only 3% of Cash ISA savers thought the £20,000 allowance should be reduced, even though the average annual contribution is only £5,300
- The survey results suggest cutting the Cash ISA allowance wouldn’t be a one way ticket to increasing participation in the UK stock market
Laith Khalaf, head of investment analysis at AJ Bell, comments:
“As we head towards the Spring Statement it’s looking less likely we will get a change in the Cash ISA allowance. However Cash ISA reform may yet be on the table further down the road, and the Spring Statement may provide an opportunity for the Chancellor to launch an industry consultation on the matter.
“Our survey results show that a reduction in the Cash ISA allowance doesn’t neatly translate into more people investing in the UK stock market, which is what the government is so keen achieve. Many consumers in the UK undoubtedly hold too much cash, and could improve their chances of meeting their long term financial goals by investing in the stock market, but cutting the Cash ISA allowance might not be the most targeted way of achieving this.
“More than half (51%) of Cash ISA savers would simply park their money in a taxable cash savings account if they couldn’t put it in a Cash ISA. That may raise some tax revenues, but they are likely to be small beer, at least to start with. By contrast, only 20% said they would put their money into the UK stock market if they couldn’t put it into a Cash ISA. Seeing as HMRC data shows around 20% of Cash ISA holders also have a Stocks & Shares ISA already, this suggests the investing sermon is only going to reach the converted. 8% of savers said they would buy crypto, yet no-one is seriously making the case that reforming Cash ISAs would boost the price of Bitcoin.”
Survey results: If Cash ISAs were abolished, or the amount you can pay into them each year got reduced to substantially below the amount you want to contribute, what would you do with your money instead?
Source: Survey conducted by Opinium on behalf of AJ Bell March 2025
Why are Cash ISA savers reluctant to invest in the stock market?
“When we asked Cash ISA savers what could get them to invest more, no one dominant factor emerges, which means manifold solutions may be required to address this issue. The survey results suggest simply taking away some of the Cash ISA allowance is a bit like trying to water a flowerbed with a firehose.
“It’s important to recognise there are always some people who aren’t going to be in a position to invest, either because of temperament, or as a result of modest levels of disposable income. 38% of Cash ISA savers said there was nothing that could encourage them to invest more, with 12% saying they don’t have enough money to invest, and 16% saying investing is too risky for them. 10% said they don’t know enough about investing, which could potentially be addressed through better education and information, though this group also declined to say more information could help them to invest.
“Better performance from the UK stock market looks like it could be a pretty powerful force in getting more Cash ISA savers to invest in it. 26% said this would encourage them to invest more, and when we asked Stocks and Shares ISA investors the same question, 43% said it would encourage them to invest more. That suggests better performance from the UK stock market could create demand from both new and existing investors, creating a virtuous circle. Stock market performance is cyclical, and not within the gift of government policy making. However there are tentative signs the UK stock market is turning a page. So far this calendar year the FTSE 100 is up 6.5%, while the S&P 500 has returned -4.5% (Source: FE, price return in local currency to 18/03/2025).
“A fifth of Cash ISA savers said more information would get them to invest, or invest more, which feels like a bit of an open goal that costs the government very little. The work the FCA is doing to shift the advice guidance boundary could help here, encouraging firms to engage with customers in a more targeted and informative way.
“Bigger tax breaks were also relatively popular way to encourage investing, including bigger tax free allowances for dividends and capital gains, and a larger stocks and shares ISA allowance. Given frozen income tax thresholds and cuts to dividend tax and capital gains tax in recent years, it’s natural that savers might respond to tax incentives to get them investing. The survey also found 15% of Cash ISA savers said they would invest more in the UK stock market if stamp duty wasn’t charged on buying UK shares. It’s somewhat bewildering that if a UK investor wants to buy shares in AstraZeneca, they have to pay 0.5% of the purchase price in stamp duty, but if they want to buy Apple shares, they don’t, because it’s not a UK-listed company.
“More tax breaks for investing might well get more people to buy UK stocks, but they aren’t likely to be forthcoming. Nonetheless this does demonstrate the levers the government could pull to encourage greater participation in the stock market, if we weren’t in such a challenging fiscal situation. Of course, there is something of a chicken and egg situation here, as a growing stock market would create more tax revenues for the government too.”
Survey results: What, if anything, would encourage you to invest, or invest more in the UK stock market?
Source: Survey conducted by Opinium on behalf of AJ Bell March 2025
A warning for Rachel Reeves: savers are protective of their tax shelters
“When we asked Cash ISA savers directly what they thought should happen to the Cash ISA allowance, interestingly only 3% said it should be cut. What’s interesting about turkeys not voting for Christmas? Only 10% of Cash ISA subscribers actually use the full £20,000 ISA allowance** and the average Cash ISA subscription is approximately £5,300***. Nonetheless 44% of Cash ISA savers responding to our survey said the Cash ISA allowance should be maintained, and 43% said it should actually be increased.
“The figures probably speak to a population which is weary of higher taxation, and is looking for some movement in the opposite direction. And there’s a bit of a warning for Rachel Reeves in these numbers. Savers and investors are fiercely protective of their tax shelters, even if they’re not fully utilising them at the moment. 18 million Cash ISA savers are a lot of voters to rub up the wrong way, especially if the economic benefits might be questionable. It’s not just the older generation who use Cash ISAs either. In our survey 48% of over 55s said they had a Cash ISA, which compares to 40% of 18-35 year olds. That’s not a huge generational divide.”
Survey results: What do you think should happen to the current Cash ISA tax-free allowance of £20,000?
Source: Survey conducted by Opinium on behalf of AJ Bell March 2025
*nationally representative sample of 1,792 Cash ISA holders conducted by Opinium on behalf of AJ Bell in March 2025
** based on HMRC data for tax year 2021/22 and excluding those who hold both Cash ISA and Stocks and Shares ISA
*** based on HMRC data for the tax year 2022/23
