Warning issued to savers over ISA update as Rachel Reeves announces major change

Experts have issued a warning for those considering certain ISAs following Rachel Reeve's latest update for savers. The Chancellor announced at an event in Leeds that new private asset funds will qualify as Stocks and Shares ISAs from next year, meaning Brits can put their money there and earn tax-free returns on up to £20,000 of their input if current limits remain in place. These long-term asset funds (LTAFs) invest in private assets, including infrastructure and start-up companies.

While they can reward investors with great returns, there are some elements that might prove to be a drawback for savers, especially those who are considering a move away from the safer Cash ISA option, experts have said. It has been reported that Rachel Reeves is aiming to encourage more investment from Brits when it comes to their savings in a bid to kickstart the UK's economy. However, experts have laid out some considerations that savers need to think about before opting to invest rather than just store their money and earn tax-free interest.

AJ Bell and Interactive Investor told the Financial Times that LTAFs do not allow investors to access their money quickly. Rather, they will need 90 days' notice if investors wish to withdraw their money.

Reeves revealed in her Mansion House speech last week: "I have confirmed that long-term asset funds can be included in stocks-and-shares ISAs, allowing long-term Isa investors to benefit from this innovative product."

AJ Bell has shared concerns about "liquidity", while Interactive Investor said that education would be key if these investment plans are to be included as Stocks and Shares ISAs.

"In addition, retail investors will also need to be comfortable with these funds not offering daily dealing, meaning they cannot sell their investments quickly," they said.

Meanwhile, Alexander Scott, chief executive of IntegraFin, shared a warning with the Financial Times: "LTAFs bring a higher risk of mismatch between investors' liquidity requirements and that of their investments."

While there is risk involved, LTAFs can offer significant results to those who lock away their money. "We welcome more flexible access to private markets for those clients for whom these types of products are suitable," said Emma Wall, head of platform investments at Hargreaves Lansdown.

Rachel Reeves is expected to announce a number of changes to ISA rules in the near future, including a reduction of the limit from £20,000 to as low as £10,000.