Are Cash ISAs Under Threat? How Investors Can Adapt to Potential Reforms

Chancellor Rachel Reeves’ Spring Budget on 26 March 2025 brought renewed focus to the future of ISAs, particularly cash ISAs. While no formal changes were announced, the government signalled a strong interest in reforming the ISA system to encourage greater investment in UK equities over cash savings. This is part of a wider initiative to boost domestic investment and redirect capital into more productive parts of the economy. 

So, what does this mean for savers - and could property investment become the preferred alternative? 

Could Cash ISAs Be Phased Out? 

Speculation ahead of the Budget suggested that the government might impose a cap on cash ISA contributions—potentially limiting them to £4,000 per year, significantly below the current £20,000 allowance. The rationale behind this would be to stimulate growth in capital markets by encouraging savers to consider stocks and shares ISAs instead. 

Further discussions include the idea of merging cash ISAs and stocks and shares ISAs into a single product. Under this model, the cash component would be limited, nudging investors towards equity-based products. 

Naturally, any shift away from cash ISAs is likely to concern more risk-averse savers, particularly those approaching retirement or prioritising capital preservation. However, there are other ways to put money to work - some of which can offer even more competitive returns than the average high street ISA, without requiring direct exposure to volatile markets. 

Could Property Bonds Be the Answer? 

Alternative investments like property bonds are already gaining traction amid ongoing speculation about ISA reforms. These bonds involve lending capital to a property developer in exchange for fixed, contractual returns over a set period. In many cases, they offer yields that exceed those available through traditional savings vehicles - particularly in a low-interest environment. 

One of the major advantages of property bonds is that they offer access to the property market without the demands of direct ownership. Investors don’t need to worry about managing tenants or maintaining buildings -they simply provide capital for a project and receive income once it matures. Funds are usually directed towards residential, commercial, or mixed-use developments, with returns generated through sales or rental income - managed entirely by the developer. 

Not only do property bonds offer attractive returns and a hands-off approach, but they also support much-needed development projects across the UK, helping to address wider social challenges such as the housing shortage. 

Understanding the Risks 

As with all investments, property bonds come with risks. These products are not covered by the Financial Services Compensation Scheme (FSCS), which means your capital is at risk if the developer runs into financial difficulty. That’s why it’s essential to carry out due diligence - ensuring you partner with a credible developer with a strong track record. Understanding the terms of the bond and reviewing the specifics of the underlying project are also key. 

The Importance of Diversification 

With the future of cash ISAs under review, more individuals are likely to consider alternative investment options. Property bonds, in particular, may benefit from this trend - but investors should be careful not to put all their eggs in one basket. Diversifying across asset classes - combining traditional investments like equities and bonds with alternatives like property bonds -can help manage risk while pursuing higher returns. 

Self-invested personal pensions (SIPPs) may also be worth exploring, offering a tax-efficient way to invest in a wider range of assets, including property bonds, for those with the appropriate risk appetite. 

While the Spring Budget did not introduce sweeping ISA reforms, the government’s clear direction suggests change may still be on the horizon. Staying informed and speaking with a qualified financial adviser can help ensure your savings strategy remains fit for purpose, regardless of what lies ahead.