Reeves is due to deliver her Mansion House speech, which is rumoured to include an announcement to cut the cash ISA subscription limit, next Tuesday (15 July).
There is speculation that the annual cash ISA allowance could be cut to as little as £5,000 a year. The Government wants to boost the London stock market by encouraging savers to shift their money from cash to investments.
But the BSA has written an open letter to Reeves urging her to maintain the current £20,000 limit.
The letter said: “Beyond their personal benefits, cash ISAs play a vital role in the broader economy. The funds deposited in these accounts support lending, helping to keep mortgages and loans affordable and accessible.
“Any significant reductions to the cash ISA limits would make this funding more scarce which could have the knock-on effect of making loans to households and businesses more expensive and harder to come by. This would undermine efforts to stimulate economic growth, including the Government’s commitment to delivering 1.5 million new homes.
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“Cutting the cash ISA limit would send a discouraging message to savers, who are sensibly trying to plan for the future and undermine a product that has stood the test of time. It would make the whole ISA regime more complex and make it harder for people to transfer money between cash and investments.
“Restricting cash ISAs won’t encourage people to invest, as it won’t suddenly change their appetite to take on risk.”
Last week Orton Financial warned that cutting the ISA limit could lead to a rise in offset mortgages as savers look for an alternative for their money.
Meanwhile a study by Atom Bank found that half of savers would start adding excess money into another cash savings account rather than a stocks and shares ISA if the cash ISA allowance was cut.
