A fan of Martin Lewis asked if they should avoid a certain type of account
Martin Lewis has offered his perspective on ISA rates after a question sent to him by a follower. Savers may want to take note that some significant changes to savings rules are coming in soon.
A follower contacted the financial journalist through social media with a query. They referred to the previously announced Government changes to ISAs, and how it was “suggested to people to invest in stocks and shares ISAs”. However, the saver said they were unsure about this approach given the conflict in the Middle East.
They asked Mr Lewis: “As the war has plummeted shares/values I wonder if you could do a feature on this and compare the £20,000 or even the soon to be less £8,000 difference to value compared to ISA rates.”
As revealed in the Autumn Budget 2025, the cash ISA allowance is set to be effectively reduced from April 2027. You can presently save up to £20,000 each tax year into ISAs, split as you wish between cash ISAs and stocks and shares ISAs.
From the next tax year, you will only be permitted to use up to £12,000 of the allowance as you choose, while the remainder will need to be allocated to stocks and shares accounts. However, people aged 65 and over will be exempt from the new rules and will keep the current £20,000 allowance.
False comparisons
In response to the question, Mr Lewis warned it may be a mistake to swerve away from investments now despite the market volatility. He said: “Not sure share values have really plummeted that much.
“E.g. FTSE 100 did in March but they’re not that far from peak right now and massively up in a year.” He also warned the saver: “The problem with such comparisons is it is all about the time period you pick.”
The consumer expert was recently asked on his BBC podcast whether now is an opportune moment to open a stocks and shares ISA, given the conflict in Iran. He said in response: “If you’re talking about investing for a long term money that you don’t need for five years and you’re going to do that in a nice spread of investments, like a global tracker fund or an S&P tracker or FTSE tracker, then you just have to accept that you will never know when the perfect time to put money in is.”
Savings tactic
Nonetheless, he did offer one way to mitigate the risk while building up your investment-based savings. Mr Lewis explained: “You could put £10,000 in now but you could arrange with the provider that it sits in its cash part. You can hold it in cash, within a stocks and shares ISA, for the moment.
“You could say I’ve got £10,000, over the next 10 months, I’d like you to buy £1,000 a month of that tracker fund that I’m putting my investment into. It’s called pound-cost averaging.
“Because you’re drip feeding the money in, that helps smooth out the short-term volatility of buying at the right moment. So if you’re worried about that volatility, you might want to adopt that tactic.”
Savings rules changes
Further savings rule changes are set to take effect from April 2027. The rate applied to taxable savings will rise by two percentage points across each tax bracket.
Those on the basic rate of income tax can earn up to £1,000 in interest each tax year without incurring any tax on those earnings. Any growth within an ISA does not count towards this threshold, as ISAs remain entirely free from tax.
