After weeks of speculation, the Chancellor has confirmed there will be no change to the annual ISA allowance on cash savings—for now. That’s welcome news for savers who’ve grown used to sheltering up to £20,000 a year from tax.
But while the rules are staying the same, that doesn’t mean your savings strategy should too.
The Mansion House speech set a new tone: that taking a little extra risk, when it’s well understood and managed, can be a sensible step. In fact, some of the stricter risk warnings are to be relaxed to reflect that view.
If the debate between the Chancellor and lobbyists from various parts of the financial services industry has shown us anything, it’s how quickly policy can shift—and how important it is to regularly reassess where and how you hold your money.
Many savers had already begun to explore alternatives like Premium Bonds or topping up Cash ISAs in advance of any changes. Before you move your hard-earned savings, it’s worth taking a closer look at the implications.
The debate between the government and the finance industry, played out in the media, about whether allowances on Cash ISAs should be reduced. Edited to make clear.
Premium Bonds: The feel-good factor with hidden downsides
Premium Bonds have an almost nostalgic appeal. For years, they’ve been marketed as a safe, government-backed way to save. After all, they’re easy to buy, you can get your money back when you need it, and there’s always that tantalising chance of a big win. Yet in practice, the vast majority of bondholders never win more than a few small prizes each year, and many see no return at all.
According to NS&I’s own statistics, the effective average return on Premium Bonds is 3.8% as of July 2025 and Prize Draw amounts are set to reduce to 3.6% in August. While that headline rate may sound competitive, in reality, it’s simply an average across all prizes, skewed by a few very large jackpots. Most people’s real returns are considerably lower—sometimes effectively zero if you don’t get lucky.
For savers who prefer certainty and steady growth, that can be a risky bet.
Cash ISAs: Are they keeping up?
Although the £20,000 allowance remains in place for now, many savers have been bracing for a significant cut. That moment of uncertainty has been a timely reminder that even with a generous allowance, how you use it matters.
Average instant-access Cash ISA rates are currently hovering around 3.8%—less than half the level of inflation over recent years. Even with a tax-free wrapper, your money may still be losing purchasing power.
So, while the rules haven’t changed, is it time your approach did?
Why now could be the right time to diversify your approach
Many savers are now considering a more balanced approach, spreading their savings across different types of ISA to help manage risk and give their money more opportunity to grow.
While cash feels safe, it may actually carry more risk than you think.
That might sound bold, but the data backs it up. Analysis by Schroders found that UK households who favoured cash ISAs were more than £500 billion worse off over the 10 tax years to April 2023, compared with if they’d invested in the stock market. That figure reflects what those savings would be worth as of April 2025. Past performance is no guide to future returns, but the gap is hard to ignore.
Of course, not everybody is attracted to investing in the stock market, which can present savers with a dilemma – accept lower returns or take on a level of risk that they’re not comfortable with.
Our alternative: Combining lower market risk, tax efficiency and police-friendly support
At Police Friendly and Metfriendly, we’ve been helping members of the Police Family grow their savings for over 130 years. While many of our members may hold Cash ISAs and Premium Bonds, we also offer an alternative: an ISA designed to smooth out the bumps in the market while providing steady, long-term growth potential.
Our ISA offers a simple way to invest, with built-in smoothing that helps protect your savings from short-term market swings.
Our ISA is classified as a Stocks & Shares ISA—but that doesn’t mean it’s 100% invested in shares. In fact, just 30% of the fund is invested in shares. More than half is in fixed-income assets such as bonds, designed to deliver stable returns. The rest is spread across cash and property.
This carefully constructed mix of assets has delivered stable returns over time and, for the past three years, its annualised growth has been more than double the level of an average cash ISA.
While past performance is not a guide to future returns, this kind of balanced, long-term investment aligns with the broader direction signalled by the Chancellor when encouraging a more open-minded view of measured investment risk.
You don’t need to be an expert investor, and you don’t need to monitor the markets day to day.
Your next steps
Everyone’s circumstances are different, and what’s right for you will depend on your goals, your tax position, and your appetite for risk. But what unites many of our members is the desire to feel confident that their savings are working as hard as possible, without unnecessary complexity or sleepless nights.
If you’d like to explore how our ISA could fit into your plans, you can:
- Find out more online
- Speak to our friendly team—we’re here to help you weigh up your options, with no pressure
Everyone’s circumstances are different, and what’s right for you will depend on your goals, your tax position, and your appetite for risk. But what unites many of our members is the desire to feel confident that their savings are working as hard as possible, without unnecessary complexity or sleepless nights.
