One of the more eye-catching measures announced in chancellor John Healey’s first Autumn Budget was the creation of a ‘Starter ISA’.
Little is currently known about this product, besides that it will be developed with the UK’s investment industry and will aim to encourage more Brits to start investing, but there is optimism that it could mark a more positive step than previous attempts to foster an investing culture.
“A Starter ISA could be a much more effective way of creating a new generation of investors than simply trying to push people out of cash,” said Isabella Galliers-Pratt, senior investment director at wealth manager Rathbones. “The real barriers to investing are often confidence, understanding and fear of losing money, rather than a shortage of tax-efficient products.”
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The context for the Starter ISA
The UK is disproportionately a nation of savers. Despite the historical long-term outperformance of investments compared to savings, analysis from wealth manager Vanguard found that in 2024 34% of UK household financial assets were held in cash, compared to just 16% in investments.
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In the 2025 Autumn Budget, then-chancellor Rachel Reeves sought to address this by reducing the annual deposit limit for cash ISAs to £12,000 for under-65s from April 2027 – with the goal of encouraging the remaining £8,000 of the total £20,000 per year annual ISA allowance to be invested in stocks and shares.
The policy attracted criticism for over-complicating the ISA system. Healey has scrapped it, confirming in his Budget that the annual cash ISA limit will remain at £20,000.
What might the Starter ISA look like?
Healey is not abandoning Reeves’s goal of getting more Brits investing. Instead of cutting cash ISA limits, a new ‘Starter ISA’ will be created which will, in Healey’s words, “reward first-time investors” and be developed in association with the investment industry.
The official government Budget document said the government will: “explore a new ISA incentive for people investing in a stocks and shares ISA for the first time. The detailed design will be developed with industry.”
So there is very little to go on at the moment in terms of what this product will look like and how it will get people investing, but the wording suggests that this will take the form of some kind of financial incentive to invest in a stocks and shares ISA over the cash equivalent – as opposed, for example, to a completely new ISA product.
Martin Lewis, founder of consumer finance site MoneySavingExpert, discussed the scheme in a post-Budget video in which he claimed to have spoken to Healey about incentivising people to start investing.
“My proposal for that was basically, you get a 10% uplift on the first £2,000 you put into a [stocks and] shares ISA,” said Lewis, who also claimed he would be involved in the government’s consultation with industry.
There is no clarity yet, though, whether this is the form the incentive will take.
“The detail will matter, but a meaningful incentive to make that first investment, alongside the right education and support, could help turn more savers into long-term investors,” said Galliers-Pratt of Rathbones. “That could take the form of a government top-up on an initial investment, for example, giving people a tangible reason to take that first step.”
“The focus should be on making investing feel accessible and worthwhile, rather than simply making cash less attractive,” she added.
Maintaining as much simplicity within the ISA system as possible is likely to be key to its success.
“As we consider the new Starter ISA, policymakers need to learn lessons from the complexity and unpredictability of changes to ISA rules in recent years,” said John Owen, chief executive of the Investment Association, an industry body that represents the UK’s fund managers. “We therefore urge the Government to now take a consistent, long-term approach to policy affecting ISAs to help people achieve greater financial resilience.”
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