The savings expert warned against making misleading comparisons
Martin Lewis has offered his perspective on ISA rates after an enquiry from a follower. Savers should be aware that significant changes to ISA regulations are imminent. A fan of his work contacted the financial journalist via social media with a query.
They referenced the previously announced Government changes to ISAs, and how it was “suggested to people to invest in stocks and shares ISAs”. However, the saver expressed scepticism about this approach, given the Middle East conflict. 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. Currently, you can deposit 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 allocate up to £12,000 of the allowance as you choose, while the remainder must be directed towards stocks and shares accounts. People aged 65 and above will be exempt from the new regulations and will maintain the existing £20,000 allowance.
Misleading comparisons
Responding to the query, Mr Lewis cautioned that it might be unwise to abandon investments 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 added another word of caution: “The problem with such comparisons is it is all about the time period you pick.”
The consumer expert was recently questioned on his BBC podcast about whether now is a good moment to open a stocks and shares ISA, given the Iran situation. 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.”
Drip feed approach
Nonetheless, he did offer one way to mitigate the risk while growing 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 rule changes
More changes to savings regulations are set to take effect from April 2027. The rate applied to your taxable savings will rise by two percentage points across each tax band.
Those on the basic income tax rate can earn up to £1,000 in interest annually without incurring tax on these returns. Fortunately, ISA growth doesn’t contribute to this threshold, as ISAs are completely tax-free.
