Cash ISA U-turn confirmed as Rachel Reeves fails to axe £20,000 limit tonight

A cut to Cash ISA limits, widely expected to be announced by Rachel Reeves tonight, has not been put in place following reports of a last-minute U-turn. For months, the financial sector was abuzz with rampant speculation that the government was set to cut the current Cash ISA limits from their £20,000 limit to as low as £4,000, in a bid to boost investment over cash savings.

But as recently as last Friday, reports suggested that Ms Reeves had shelved plans to cut the limit on tax-free cash savings for the time being after pressure from banks and campaigners like Martin Lewis. In her Mansion House Speech to the financial sector tonight, the Chancellor announced various broad plans aimed at boosting the economy, including allowing Long-Term Asset Funds to be included in Stocks and Shares ISAs and an advertising blitz to promote investing.

But one announcement that was conspicuous in its absence was around Cash ISA limits.

No plans to change Cash ISA limits were announced tonight, meaning that for the time being, the tax-free savings accounts will stay at £20,000 per year.

Rachel Reeves said in her speech: "I recognise the potential for ISA reform to improve returns for savers and access to capital for UK businesses.

"I have confirmed that Long-Term Asset Funds can be included in stocks and shares ISAs, allowing long-term ISA investors to benefit from this innovative product."

The apparent change of heart comes after a backlash from some banks and building societies as well as campaigners like Martin Lewis that suggested the plan to cut tax-free savings down to as little as £4,000 would be a 'big mistake'.

Finance firm Fidelity had suggested the limit, currently set at £20,000 for both Stocks and Cash ISAs, in any combination of the two, could be reduced just for Cash ISAs, to just £4,000.

It had been reported that Ms Reeves could cut the limit less far than that, to about £10,000 to £15,000.

But following advice from across the sector, the Chancellor has tonight declined to announce any changes to ISA limits for the time being.

Instead, the Chancellor is looking at other ways to encourage people to invest in stocks and shares in a bid to grow the economy, including a big advertising campaign encouraging savers to move money into investments and the ability for banks to nudge savers into moving money from low-interest savings into investments instead.

However, Rachel Reeves has also refused to rule out future changes to Cash ISAs, leaving the door open for a possible cut in future, despite recognising the 'differing views'.

She continued: "And I will continue to consider further changes to ISAs engaging widely over the coming months and recognising that despite the differing views on the right approach we are united in wanting better outcomes for both savers and for the UK economy."