One in every five cash ISA savers (20%) would switch to investing in the UK stock market if the cash ISA allowance was to be reduced or abolished.

This is according to research by AJ Bell, which found that the majority of cash ISA savers (51%) would instead opt to stick the money in a taxable savings account.

The investment platform’s findings, based on a survey of 1,792 current cash ISA holders, come ahead of the Chancellor’s Spring Statement next week, which has been rumoured to include some changes to the way cash ISAs work.

Should Rachel Reeves announce a proposal to change the cash ISA allowance next week, AJ Bell’s research also found that 24% of current cash ISA savers would buy premium bonds or an NS&I product, while 8% would buy crypto.

AJ Bell found that just 3% of cash ISA savers thought the £20,000 allowance should be reduced, even though the average annual contribution is currently around £5,300.

“As we head towards the Spring Statement it’s looking less likely we will get a change in the Cash ISA allowance,” head of investment analysis at AJ Bell, Laith Khalaf, said.

“However, cash ISA reform may yet be on the table further down the road, and the Spring Statement may provide an opportunity for the Chancellor to launch an industry consultation on the matter.

“Our survey results show that a reduction in the cash ISA allowance doesn’t neatly translate into more people investing in the UK stock market, which is what the Government is so keen to achieve.”

Khalaf added that many consumers in the UK “undoubtedly hold too much cash” and could improve their chances of meeting their long-term financial goals by investing in the stock market.

However, he warned: “Cutting the cash ISA allowance might not be the most targeted way of achieving this.

“Seeing as HMRC data shows around 20% of cash ISA holders also have a stocks & shares ISA already, this suggests the investing sermon is only going to reach the converted.”

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