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This Isa season is set be a bumper one, and we have chancellor Rachel Reeves to thank.
Growing fears that she will meddle with this valuable, long-established tax break mean Britons are stuffing huge sums into Isas — a phenomenon dubbed “the Reeves effect” by a head honcho at one investment platform I spoke to.
With a few weeks until the end of the tax year, investment platforms tell me a wall of money is flowing in.
Fidelity says the amount of money paid into stocks-and-shares Isas has risen 22 per cent in 2025, compared with the same period last year. For Junior Isas, it’s even higher at 40 per cent as parents stoke tax-free investments for their children.
This echoes a record swing towards investment Isas in the FT’s annual bonus survey. Plenty of readers said they were de-prioritising pension saving after inheritance tax changes in the Budget, and maxing out Isas for themselves and their families. Hargreaves adds that inflows into investment Isas, the Lifetime Isa plus cash Isas have also been strong, with Bank of England data this week showing that £2.2bn flowed into cash Isas in January alone.
I suspect February’s figures will be even higher, due to the ridiculous lobbying campaign started by the UK investment industry to scrap or limit cash Isas, or reserve future tax breaks for unloved UK stocks. They’re clearly doing well out of the ensuing panic! But has it also achieved the more admirable goal of raising awareness of investing?
I am all for building a greater investment culture in the UK, but forcing the risk-averse to invest is not the answer — especially at a time when more experienced investors fear what will happen when the “America Bubble” bursts.
An estimated 6 per cent of UK adults have a stocks-and-shares Isa, which is shockingly low. But if we want more long-term cash savers to make the switch, the answer lies in educating the masses about investing.
A nudge from an older family member may have prompted you to get started. Yet before the internet and social media broke down the barriers to learning about investing, it often happened by chance.
The new series of my Money Clinic podcast features six very different FT readers spilling the beans about their real-life experiences, including 45-year-old Stephan, who got started 15 years ago after overhearing a colleague talking about index funds, and asking what these were. Today, he is sitting on a six-figure portfolio.
Contrast his story with the episode featuring 49-year-old Jane. A recent inheritance has boosted her cash savings to a six-figure sum — yet she’s too scared to invest, and doesn’t know where to start.
Cash has an important role to play in investment portfolios — just ask Warren Buffett. Building up an emergency fund in a cash Isa before you start investing is a sensible move, and your level of cash holdings could be influenced by changing life goals, such as buying a property. But retaining this flexibility — and making it even easier to switch — is vital.
I was in my early 30s before I opened a stocks-and-shares Isa. I assumed — wrongly — that you’d need thousands of pounds to open one, and you’d have to invest it all in one go. Risk warnings were much more prominent than any basic information about how these products worked. End result — investment inertia.
What broke this for me was joining the workplace share save scheme operated by Pearson, then owner of the Financial Times. “Learning by doing” is a hugely important aspect of investing. I gradually felt more comfortable that investing was “for me”. I learned more about stocks-and-shares Isas, as everyone at work talked openly about the share scheme, and where they were going to put the proceeds.
If the chancellor wants more people to make the move from cash to investments, adding complexity to stocks-and-shares Isas will not achieve this. The government sensibly abandoned the idea of a UK Isa, and I fear there would be a far more damaging “Reeves effect” if this was resurrected. So here’s how I recommend she could lean into this year’s sudden surge of interest in Isas.
The opportunity to self educate about investing via social media and internet discussion forums is a game-changer. Reeves invited respected financial content creators into Number 11 Downing Street this week to mark the launch of a new media unit, showing how powerful these platforms are for raising awareness about investing.
She should be emboldened to push the Financial Conduct Authority to loosen the advice/guidance boundary, so that simple, accessible and personally tailored information about investing is available, at a low cost, for the masses from professionals. Many big platforms are ready to push the button.
Real progress on boosting financial literacy in schools is long overdue. But my own experiences show how the workplace — the centre of wealth creation for most — also plays a crucial role.
Sadly, the dwindling number of UK-listed companies means fewer workers have access to share-save schemes. Plus, British savers are notoriously “hands off” about managing their investments within workplace pensions. We tend to end up with a proliferation of small pots which languish away, invested in default funds.
The chancellor could seek to boost engagement by backing “pot follows member” proposals that would make it easier for workers to accumulate and manage one big pension pot that would follow them if they moved jobs. Greater ownership of pensions would make people more likely to engage with guidance sessions that many employers already provide. And learning more about investing in general could alert more people to the additional benefits of stocks-and-shares Isas.
I’ve noticed that many workplace pension providers have already joined the dots — it’s often possible for staff to use their provider’s app to open an Isa too. And as people gain confidence making their own active investment choices, there is every chance that “home bias” will drive more of their monthly investments into UK funds and stocks — the “Reeves effect” that the chancellor most desires.
Claer Barrett is the FT’s consumer editor and author of the FT’s Sort Your Financial Life Out newsletter series; claer.barrett@ft.com; Instagram and TikTok @ClaerB
