Huge ISA change announced by Rachel Reeves with '£9,000 boost'

A huge ISA change has been announced by Rachel Reeves today which promises to hand a £9,000 boost to savers. The Chancellor delivered a speech in Leeds on Tuesday afternoon with a package of changes to the financial industry called 'The Leeds Reforms' which aims to encourage more people to invest in stocks and shares rather than keep cash in low-interest savings accounts.

It had been widely speculated that Ms Reeves was looking to cut annual Cash ISA limits in order to achieve this, but no such change has yet been announced, and it is thought that the government has had a change of heart on the issue following pressure from banks and campaigners like Martin Lewis. Right now, savers can put £20,000 in a Cash ISA each year and pay no tax on the interest. Under plans announced today, banks will nudge people with savings sitting in 'low interest accounts' to push people to invest it instead.

A big advertising campaign urging people to use Stocks and Shares ISAs will also be launched, the government said.

One huge change being made to ISAs under the plans is to allow 'long term asset funds' to be held in Stocks and Shares ISAs.

The government says: "As a first step, the Government will allow Long Term Asset Funds to be held in Stocks & Shares ISAs next year, allowing more individuals to invest in assets that will support the UK's future success, like innovative businesses and infrastructure - which can also deliver better returns."

The government's figures outline that someone who had £2,000 in a cash account who moved it to a Stocks and Shares account would then be '£9,000 better off' years later.

The announcement says: "Banks will send investment opportunities to savers with cash sitting in low-interest accounts for the first time, and major financial institutions - including high street banks - are backing an advertising campaign that will highlight the opportunities of investing for consumers who are able to do so.

"Under current trends, moving £2,000 from these accounts to stocks and shares could make millions of people over £9,000 better off in 20 years' time."

Chancellor Rachel Reeves said: We fixed the public finances and stabilised the economy. Now we need to double down on our global strengths to put the UK ahead in the global race for financial businesses - creating good skilled jobs in every part of the country and helping savers' money go further through our Plan for Change."

The government added: "Stocks and shares have performed significantly better than cash savings accounts in recent decades.

"According to some industry estimates, more than 29 million adults across the UK have cash sitting in a low-interest rate account offering around 1% - while the average return for stocks and shares over the last 10 years is around 9%.

"If those savers invested £2000 today, they could have £12,000 in 20 years' time. This compares to £2,700 if they held this money in a cash account offering 1.5% at the current interest rate, making them over £9,000 better off."

Economic Secretary to the Treasury, Emma Reynolds said: "Helping people take advantage of better returns from investing is key to better financial health, giving them a stake in a growing economy and connecting promising businesses with capital. These reforms will make the UK the best location for financial services firms and tear down barriers to investment to growing our economy and making families better off."

A further speech is expected from Rachel Reeves at Mansion House at 9pm on Tuesday.