You don’t create confident investors by limiting their choices. You create them by helping them understand what they’re doing.
The government wants more people to invest. That’s the motivation behind its apparent plan to slash how much individuals can save in cash ISAs, possibly cutting the current £20,000 allowance to as low as £5,000. The goal is to shift more capital into equities and other long-term assets, particularly in the UK.
But restricting access to a product that people understand and trust won’t solve this problem. Savers aren’t holding cash because they haven’t been nudged hard enough. They’re holding it because cash is simple, stable and, crucially, they understand it. Strip away that option and you create uncertainty, rather than unlock investment.
For pretty much every saver, cash isn’t a speculative asset but peace of mind. It’s what they turn to when the boiler breaks, when they lose work or when they’re saving for something real and tangible: a deposit, a car, a wedding. It’s a buffer against the unknown.
Cash doesn’t demand technical knowledge. It doesn’t fluctuate. And unlike investing, it doesn’t punish you for checking your balance. That clarity and control matters, especially to people who’ve had to fight for financial stability.
Yes, returns on cash are limited. But in today’s market, with interest rates around 5%, many see it as good value for low risk. That’s a rational, informed trade-off.
That means moving from saving to investing isn’t simply about shifting accounts. It’s about entering a system that’s inherently more complex.
Most people aren’t taught how markets work. They don’t learn about risk-adjusted returns or how to weigh volatility against time. They just know that investments can lose money and that they don’t want to make a mistake they can’t afford.
The choice paralysis is real. There are thousands of funds, platforms and portfolios. Many sound similar. Some are low-cost and diversified; others are high-fee, opaque and ill-suited to beginners. But the difference between a good choice and a poor one often only becomes clear years later.
We’ve built a system that expects people to act like investors without equipping them to think like investors. That gap – between access and understanding – is where risk becomes harm.
The vast majority of retail savers will never pay for financial advice. The cost doesn’t make sense for small portfolios. DIY platforms fill part of the space, but most can’t offer tailored recommendations without breaching regulation. So users get filters, charts and disclaimers, but no clear direction.
This leaves people trying to make investment decisions alone, without context and without confidence. They’re right to be hesitant.
When ISA rules were changed in 2014 to allow more investment flexibility, uptake didn’t surge. Most savers just kept doing what they were doing.
The impulse behind the cash ISA cap is understandable. UK companies need more domestic capital. Long-term investing can build wealth. But capital isn’t passive: it follows trust and it follows understanding.
Remove the familiar structure of cash ISAs and people won’t automatically move into markets. Some may just leave their money outside the ISA wrapper. Others might disengage entirely, afraid of making the wrong call.
But if someone is nudged into investing before they’re ready and ends up taking a loss, that lesson won’t teach them to be smarter – it’ll teach them not to come back.
If the government wants more people to invest, it needs to focus less on restricting behaviour and more on building capability. That means treating financial education as a long-term priority, not a footnote.
We need a public that understands the difference between cash and risk assets, knows how to assess basic investment options and feels confident about long-term strategy. Until that foundation is in place, changing the rules around ISAs won’t move behaviour in any meaningful or lasting way.
Because investing isn’t intuitive. It’s not the same as saving and it’s not something people fall into just because a tax rule changes.
The goal of widening participation in capital markets is a good one but – while there’s merit in nudge theory – savers deserve better than a push. They need the tools to choose for themselves and the confidence to know what they’re choosing.
Pushing people toward risk without equipping them for it is potentially ineffective and harmful. Policymakers should take note: trust in financial markets is hard-won and easily lost. If the aim is to build a nation of investors, it must begin with education, not coercion.
Gary Jackson is head of editorial at FE fundinfo. The views expressed above should not be taken as investment advice.