Millions of savers could be left more hesitant about investing when the cash ISA allowance is cut from April.

The government announced in last year's Budget that from April 6, 2027, people under 65 will be limited to saving £12,000 a year in a cash ISA.

The remaining £8,000 of the £20,000 ISA allowance can be placed in non-cash products, including stocks and shares ISAs.

The 2026/27 tax year will therefore be the final year in which most savers can place the full £20,000 into cash ISAs.

Under-65s will only be able to place £12,000 a year into cash ISAs, down from £20,000, but the change may fail to push them towards the stock market as intended.

Hargreaves Lansdown, the UK's largest investment platform with more than two million clients, has warned that the overhaul could discourage cautious savers instead.

The stocks and shares ISA allowance will remain at £20,000. Ministers believe the different limits will encourage people to invest more of their money rather than leave it in cash.

However, Hargreaves Lansdown said cash ISAs already act as an important route into investing.

Its customer data show that one in five people who open a cash ISA go on to open an investment account within six months.

The platform warned that restricting cash ISAs could remove this first step and make some people less willing to consider investments.

Alice Haine from Hargreaves Lansdown said: "We completely support the government's ambition to get more people investing, but aren't convinced that these proposals will have that outcome."

She said the ISA system has remained popular for decades because savers understand and trust it.

Ms Haine added: "The Isa has worked for decades precisely because it is simple and trusted, and these changes risk adding complexity that could make savers more hesitant, not less."

She also warned that people make long-term financial decisions based on the expectation that savings rules will remain consistent.

Regular changes could therefore unsettle the cautious savers the Government wants to encourage into the stock market.

Industry bodies have raised similar concerns, warning that people who are uncomfortable with investment risk may not respond by opening stocks and shares ISAs.

Simon Harrington from the Personal Investment Management & Financial Advice Association said: "Savers are not going to automatically turn into investors as a result of a cap on cash subscriptions.

"Those reticent to invest will simply leave their money in current accounts or use Premium Bonds instead."

PIMFA urged the government to concentrate on targeted measures that help savers understand investing, rather than restructuring a product relied upon by millions.

Rachael Griffin from wealth manager Quilter raised separate objections about the exemption for over-65s. "The carve-out for over-65s adds another layer of complexity.

Isas were meant to be simple and flexible. Having different allowances for cash and investments, with age-based exceptions, undermines that simplicity," she said.

The Treasury defended the reforms, maintaining that stocks and shares have historically delivered stronger returns than cash savings.

"We are reforming the cash Isa to encourage more people to invest in stocks and shares which have historically performed better than cash savings and we have retained the generous £20,000 tax-free limit," a spokesperson said.

The government also stressed that nobody would be forced to move money already held in existing cash Isas.

"These changes will make people better off and will not require anyone to move existing savings from their cash Isa.

Most savers will continue to pay no tax on their savings and the Treasury and HM Revenue & Customs are working at pace with industry on the detailed rules and will update on the next steps in due course," the spokesperson added.