Financial guru Martin Lewis has delivered a stark assessment of the new Budget, labelling one key savings policy as 'perverse'. The founder of MoneySavingExpert.com dissected the Chancellor's announcements, focusing on significant changes to cash ISAs set to take effect in 2027.
The Perverse Policy: A Cash ISA Limit Cut
While the overall annual ISA allowance remains at £20,000, a major shift is coming for cash ISAs. From 6 April 2027, the amount you can save annually into a cash ISA will be slashed to just £12,000 for anyone under the age of 65.
Martin Lewis explained that this forms part of the Government's strategy to incentivise younger people to consider investment-based options, like stocks and shares ISAs, rather than relying solely on cash savings. However, he pointed out a fundamental flaw in this logic during discussions with Chancellor Rachel Reeves.
He argued that the demographic with the most money in cash ISAs is typically older savers, a group the government is not actively trying to push towards investments. "You're going to cut their limits and make them pay more tax even though you're not actually trying to affect them?" Lewis stated, describing the approach as inherently flawed.
A Crucial Exemption Secured for Older Savers
Following his conversation with the Chancellor, Lewis successfully secured a vital 'carve out' from this new rule. This represents what he calls an unexpected 'win' within the Budget details.
Savers aged 65 or older will be completely exempt from the cash ISA limit reduction. Their annual cash ISA allowance will remain unaffected, protecting a key savings vehicle for retirees and those approaching retirement.
This exemption directly addresses Lewis's criticism that the original policy would unfairly penalise older individuals who are not the intended target of the government's behavioural nudge towards investing.
Lifetime ISA Changes and a New Scheme for First-Time Buyers
The Budget also contained news for users of the Lifetime ISA (LISA), a product designed to help those aged 18 to 39 save for a first home or retirement. A major point of contention has been the scheme's £450,000 property price cap, which has been frozen since its introduction in 2017 despite soaring house prices.
While the cap remains unchanged for now, the government has announced a consultation set for early 2026. This consultation will explore replacing the current LISA with a new, simpler ISA product to support first-time buyers.
MoneySavingExpert advises that as part of this overhaul, the Chancellor is expected to review increasing the LISA property price threshold for existing savers, offering a potential future relief for aspiring homeowners.
For all savers, it is crucial to remember that the total ISA allowance of £20,000 remains intact. This means that while cash ISA contributions are restricted to £12,000 for those under 65, the remaining £8,000 of your allowance can still be placed into other ISA types, such as a stocks and shares ISA.
