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On 15th July 2025, Chancellor Rachel Reeves’ second Mansion House speech outlined reforms to bolster the UK’s financial services sector with potentially significant implications. Addressing speculation about changes to Individual Savings Accounts (ISAs), Reeves emphasised economic growth and attempts to rejuvenate retail investment while maintaining support for savers.
Why ISAs Matter:
Individual Savings Accounts, more commonly known as ISAs, offer a tax-efficient way to save and invest, enabling individuals to grow their wealth without being subject to income tax, dividend tax, or capital gains tax on the returns within the account. This can significantly enhance the amount of money accumulated over time, especially when compared to taxable savings accounts. ISAs allow tax-free savings or investments of up to £20,000 annually.
Key Points from the Mansion House Speech:
Reeves positioned financial services as central to growth, moving from post-2008 caution to a “regulate for growth” approach:
- Cash ISA Allowance Preserved: Speculation about slashing the £20,000 cash ISA limit to £4,000 was quashed after warnings from building societies about increased borrowing costs. Reeves confirmed the limit stays, stating, “It’s really important that we support people to save.”
- Promoting Retail Investment: With 18 million Brits holding cash ISAs, although a key tool for financial security, from April 2026, an Investment Association campaign and new Financial Conduct Authority (FCA) tools will encourage stocks and shares ISAs, addressing Reeves’ view that investment has been “presented in too negative a light.”
- Long-Term Asset Funds (LTAFs): Starting in 2026, LTAFs (investing in infrastructure and private equity) will be included in stocks and shares ISAs, offering potential higher-return, UK-focused options.
- Simplifying Financial Advice: Reeves plans to streamline regulations and review risk warnings to make professional guidance more accessible, tackling the UK’s complex advice system.
Industry Response:
The Building Societies Association welcomed the decision to maintain ISA limits, noting their role in supporting savers and keeping borrowing costs down. Critics argued cutting cash ISAs wouldn’t drive investment and could alienate savers. The financial sector supports Reeves’ growth focus but questions the pace of change amid economic challenges.
Other Reforms on the Horizon:
Beyond ISAs, Reeves is planning changes to inheritance tax, adjusting Business Property Relief to raise revenue, which could affect estate planning. She is also advancing pension reforms to consolidate schemes and boost investment in UK assets, alongside easing financial regulations to support tech and innovation sectors.
What Can Savers Do:
- Secure Cash ISAs: The £20,000 allowance remains safe, whilst as of June 2025 the average interest rates were 3.98% AER on 1-year fixed-rate ISA’s.
- Explore Investments: Stocks and shares ISAs and future LTAFs offer growth potential.
- Stay Alert: Further ISA reforms may emerge in the Autumn Budget. Monitor updates to plan ahead.
- Use New Resources: Make the most of Financial Conduct Authority tools and the Financial Conduct Authority 2026 campaign to understand investment options.
- Make an informed decision: Contact us to speak to one of our financial advisers. We can help you to achieve your financial objectives.
Cash vs Stocks and Shares: The chart below illustrates the performance of various investment funds from August 2016 to July 2025, the most recent start date of one of the funds below.
Measured as percentage growth in pounds sterling, it compares five funds against a standard money market fund. Over this period, funds A, B, C, D, and E show significant growth, ranging between 60%-80% up to July 2025, although, compared to cash, there has been notable volatility. We have seen sharp dips around 2020 due to market uncertainty surrounding the COVID 19 pandemic, high inflation in 2022, and another fall as President Trump announced wide reaching global trade tariffs in early 2025.
In contrast, fund F (Cash) remained generally flat before seeing steady gains later in the period, reflecting the stability but lack of growth typical of money market investments. The chart underscores the potential for higher returns from diversified equity funds, though it also highlights the risks, as values can fall as well as rise. Past performance is not a reliable indicator of future results.
Action: For savers pondering their options, now could be a suitable time to act. If you’re holding funds in a Cash ISA and are comfortable with the risks associated with investing, you can transfer existing Cash ISA balances to a Stocks and Shares ISA without losing the tax-free status of your savings.
To make an informed decision, contact us and speak to one of our financial advisers to assess your risk tolerance, investment goals, and timeline. We can help you explore diversified options, such as funds that spread risk across multiple sectors, to align with your financial objectives.
Summary:
Reeves’ reforms balance saver security with a push for investment. The £20,000 ISA allowance is safe for now, but future tweaks are possible. New LTAFs and simplified advice aim to make investing easier, while Inheritance Tax and pension reforms imply broader changes across the spectrum.
Sources:
- GOV.UK: Rachel Reeves Mansion House 2025 speech
- City AM: Reeves puts cash ISA reform on ice
- Sky News: Chancellor Rachel Reeves considering ‘changes’ to ISAs
- Investment Week: Cash ISA reform missing from Mansion House speech
- MoneySavingExpert: Martin Lewis on cash ISA limit
- Birmingham Live: Eight announcements coming in Rachel Reeves Mansion House speech
