The leading stock market investment platform in Britain has expressed its opposition to an immediate reduction of the cash ISA ceiling, suggesting instead the introduction of a new “combined ISA” that would allow for both cash deposits and shares to be managed within the same account.

Vanguard contends that the current annual limit of £20,000 on cash ISA savings should remain in place for the time being, differing from other investment firms like Schroders and Fidelity, which advocate for a reduction to encourage consumers to invest more in stocks.

Jon Cleborne, the CEO of Vanguard Europe, remarked that any reduction in the cash ISA limit, while eventually favorable, must be communicated and implemented gradually. He noted, “A sudden overnight change could be disruptive,” and expressed concerns that such a move would induce stress among savers.

This proposal follows Vanguard’s release of its initial figures for the UK in 2024, which indicated the acquisition of 145,000 new UK customers—likely surpassing any other platform. Their assets under management surged by 47% to £28 billion.

Chancellor Rachel Reeves is contemplating a reduction of the cash ISA limit as a strategy to enhance consumer investment in the stock market and deter the over-reliance on cash savings accounts, which have historically provided minimal or negative real returns.

Vanguard’s suggestion involves eliminating both cash ISAs and shares ISAs, replacing them with a Combined ISA (CISA), which would enable consumers to transition effortlessly between cash and shares in alignment with their investment goals and risk tolerance.

Cleborne pointed out that many potential investors are deterred by the complexities associated with ISAs, often leaving them inactive as they wrestle with the decision of choosing between a cash ISA and a shares ISA. He stated, “Every decision you present to an investor is a point of friction; the more friction points there are, the greater the likelihood of losing potential investors.”

The proposal for a CISA is expected to face strong opposition from banks and building societies, many of which may lack the capability to offer a shares option. These institutions have also strongly argued that any reduction in the cash ISA limit could significantly impact their funding, consequently driving up mortgage rates.

Although it is considered unlikely that Reeves will modify the ISA regulations during the spring statement on March 26, a reform is still anticipated in the long term.

Vanguard Europe operates under the Vanguard Group based in Pennsylvania, known for its low-cost index tracking funds and managing approximately $10.4 trillion in assets, ranking as the second-largest asset manager globally after BlackRock.

As of now, Vanguard reports having 717,000 UK customers. The newly acquired 145,000 customers in the past 12 months compares favorably to the 88,000 new clients gained by Hargreaves Lansdown, the industry’s leading platform, during the same period up to September 2024.

Currently, around 75% of Vanguard’s UK accounts are shares-based ISAs, offering an interest rate of 2.2% on cash balances. However, Vanguard has not indicated what interest rate a CISA might offer on cash deposits.