More than 18 million people have a cash Isa, and there is almost £300bn sitting in them, but earlier this month the new economic secretary to the Treasury, Emma Reynolds, spoke about the need to drive an investment culture “that realises cash is not a good investment”, adding: “Why do we have hundreds of billions of pounds in cash Isas?”.
Investing in the stock market has the potential for higher returns: the average stocks and shares Isa produced a 11.86% return over the past 12 months, compared with 3.8% for the average cash Isa, according to data issued on Thursday by the financial data provider Moneyfacts.
The main two types of Isa are the cash Isa and the stocks and shares Isa, and currently the most you can save in these accounts is £20,000 per tax year.
Major savings providers have pledged to fight any attempts to cut tax breaks on cash Isas amid reports that the government is considering a plan to slash the maximum amount people can put into them from £20,000 a year to £4,000.
He added: “We will continue to press the chancellor not to reduce the amount hard-working people can save in cash Isas, undermining the success of these accounts, which have been built over many decades and which are valued by many savers.”.
