ISA warning: Chancellor Jeremy Hunt told to cap total tax-free savings at £100k - 'Give the rich's money to the poor'

Jeremy Hunt has been told to cap the amount of money people can hold in a tax-free individual savings account.

They suggested that the amount should not be able to exceed £100,000 in ISAs, claiming it would help people who do not have any savings.

The policy could help to raise around £1billion a year by the end of 2023.

Economist at the Resolution Foundation and co-author of the Isa Isa Baby report, Molly Broome, said: “Britain is not a nation of savers. This lack of financial resilience has left many exposed during the cost-of-living crisis, with families having to build up debts and fall behind on bills.

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“Government incentives to save do exist but are not fit for purpose – prioritising tax reliefs for those with very large amounts of savings over supporting real increases in the numbers of people with savings.”

In the UK there are currently 1.5million people with £100,000 or more saved in their ISA, while 750,000 families do not have any savings.

The report also says families with no savings are far more likely to report being unable to cover unexpected expenses than families with savings greater than one month of income, at 28 per cent versus 2 per cent.

UK residents are eligible to save or invest £20,000 into their ISA a year.

There is not currently any cap as to how long they can continue to do this over their lifetime.

Broome continued: “Our myriad of savings policies are set to cost the Government £7 billion next year as interest rate rise, with the lion's share going to rich households.

“Spending over £2billion on those with Isa savings of over £100,000, while 750,000 families have no savings at all, is not what a good use of Treasury resources looks like.

“The Chancellor can address both problems in his upcoming Budget by massively expanding Help to Save for low-income families, and scaling back tax-free savings for already very-rich individuals.”

A Treasury spokesperson said: “We offer targeted support to help those on the lowest incomes save, including our Help to Save scheme which offers a generous 50% bonus on monthly deposits of up to £50 and saw users rise by over a quarter last year alone.

“Nearly nine in 10 Isa savers earn less than £50,000 a year, and we are committed to supporting even more people to save through a range of schemes we’ve made available to help with their short and long-term aspirations – such as building a rainy day fund or owning a first home.”