Mansion House speech: what it means for your money

Chancellor Rachel Reeves gives a speech as the Lord Mayor of London Alastair King (right) listens at the Mansion House dinner yesterday in London. Credit: Carl Court/Getty Images.

Rachel Reeves’ second Mansion House speech, which took place just after 9pm on Tuesday evening, proved far less dramatic than initially expected. And for many that was a good thing.

• Invest with ii: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

The lead-up to this year’s annual address, which provides an opportunity for the chancellor to lay out her vision for the financial services sector, was dominated by mooted reforms to cash individual savings accounts (ISA) – namely that the limit would be cut to shift more consumer money into the stock market.

But it was reported last week that Reeves, who’s endured a torrid few weeks, backed away from the idea after a ferocious backlash from building societies and consumer champions, such as Martin Lewis.

While plans to introduce a stingier cash ISA allowance were indeed omitted from Reeves’ speech, it still appears under consideration, and the chancellor’s flip-flop on the matter hasn’t derailed her goal to shake-up the ISA landscape to kickstart an investing culture in the UK.

“I will continue to consider further changes to ISAs, engaging widely over the coming months and recognising that despite the differing views on the right approach, we are united in wanting better outcomes for both savers and the UK economy,” Reeves said last night.

While big policy changes were remarkably thin on the ground at this year’s speech, the chancellor did unveil several measures, including the “first steps” to wider ISA reform, to “boost retail investment so that more savers can reap the benefits of UK economic success”.

So, what are these policies and how might they affect your savings and investments? Let’s take a look.

‘£9,000 a year better off’

In its Leeds Reforms, published yesterday morning, the government was clear about its intentions, flagging that the UK has the lowest level of retail investing across G7 countries.

With millions of people parking their long-term savings in cash accounts instead of putting their money to work in the stock market, they could be harming their ability to grow wealth.

“According to some industry estimates, more than 29 million adults across the UK have cash sitting in a low-interest rate account offering around 1% - while the average return for stocks and shares over the last 10 years is around 9%. If those savers invested £2,000 today, they could have £12,000 in 20 years’ time. This compares to £2,700 if they held this money in a cash account offering 1.5% at the current interest rate, making them over £9,000 better off,” the government noted.

As experienced investors know, the past is not a precursor to what will happen in the future. Stock markets might not be as fertile over the coming years, and you can get better than 1.5% from cash if you shop around.

Still, the government’s bid to unlock an investing culture in the UK is sensible and commendable. Provided you can forget about your money for five years or more, history tells us that investing gives you a much better chance of outpacing inflation and improving your financial future.

• Why investing trumps cash over the long term
• Scrapping stamp duty could help Reeves regain ground lost at Mansion House
• Should you ditch your cash ISA for a stocks and shares ISA?

When deciding between saving and investing, the core aspect is risk, something Reeves was keen to address in her speech. “For too long, we have presented investment in too negative a light - quick to warn people of the risks, without giving proper weight to the benefits.”

Better education and awareness here is key. To make sure this message reaches the ears of more savers, in April 2026 the government will launch an advertising campaign – presumably in a similar vein to “Tell Sid” campaign from the 1980s – to promote the benefits of retail investing and refresh the industry’s current approach to risk warnings.

This is a positive development. Many people are wary about investing amid fear they will lose money, so instead park their long-term savings in low-interest cash accounts that lag inflation, eroding their wealth in “real terms” and harming their financial future.

ISA reform in motion

Big announcements regarding the future of ISAs will clearly have to wait, but Reeves did announce some minor tweaks to the current regime – perhaps in an effort to assuage concerns that the government is treading water in its aim to simplify the ISA landscape.

From April 2026, long-term asset funds (LTAF) – which enable investors to access less liquid investments such as infrastructure and private equity – will be permitted within stock and shares ISAs.

The government said this will allow “more individuals to invest in assets that will support the UK’s future success, like innovative businesses and infrastructure – which can also deliver better returns”, striking a similar chord with its plans for how pension schemes invest.

While LTAFs were made available within innovative finance ISAs (IFISA) from April 2024, the government hopes broadening access to the stocks and shares version will help funnel more money into UK private markets.

• How DB to DC pension shift is impacting workers’ retirements
• Sign up to our free newsletter for share, fund and trust ideas, and the latest news and analysis

IFISAs were launched nine years ago but take-up has been astonishingly low. In the 2022-23 tax year, roughly 17,000 new IFISAs were taken out, dwarfed by subscriptions to cash and stocks and shares ISAs, which were 7.9 million and 3.8 million, respectively.

It’s perhaps interesting to note that the government described this as a “first step” to help people choose the right assets within their ISA, suggesting simplification is in train. Many have long argued that there are too many types of ISA – with currently six in total – and the government should thin the herd to make the landscape easier to understand.

Targeted Support coming your way from next April

Elsewhere, the Financial Conduct Authority’s (FCA) Targeted Support regime, which will enable financial providers to suggest appropriate products and strategies to consumers with “similar circumstances and characteristics” has been given the green light from April 2026.

Think of this as a middle ground between basic guidance and regulated financial advice; extra assistance with some of life’s big financial decisions, without it being a personalised recommendation. A policy note published yesterday cited concerns that less than 9% of UK adults accessed financial advice in the year to May 2024, and “many are turning to informal and unregulated sources of guidance such as social media”.

As well as helping consumers make sensible decisions with their pension savings, Targeted Support will “allow banks to alert customers about specific investment opportunities to consider shifting money from a low-return current accounts to higher-performing stocks and shares investments”, according to the government.

No mention of new pension reforms

The pre-event rumour mill pointed towards changes to the pension landscape, but other than relaying the Mansion House Accord, a voluntary agreement signed by 17 large pension schemes to invest more in private assets, any fresh reforms were absent.

Reeves was apparently gearing up to launch the second phase of the government’s landmark pension review, which will focus on retirement adequacy; notably whether workplace pension contributions should be jacked up.

The government finds itself in a rather delicate position here. On one hand, there are very real concerns that current minimum amounts - 8% of qualifying earnings split between employees and employers - are insufficient to achieve a comfortable retirement. Action is required to avert - or at least soften - a looming retirement crisis.

But on the other, workers are still grappling with the rising cost of living and businesses are facing steeper costs due to hikes to corporation tax and, more recently, employer national insurance, as well as the minimum wage increase. Reeves and pension minister, Torsten Bell, must tread carefully here. Asking businesses to pay more into staff pensions at this juncture wouldn’t be well received, to put things mildly.

• Self-employed pensions: how I’m using a SIPP for my retirement
• I’m nearing retirement – what are my pension options?

There was also no word from Reeves on how she seeks to address the floundering pension engagement among self-employed pension workers, another area that requires speedy attention.

More to be revealed at Autumn Budget?

The Mansion House speech is not the forum for introducing major changes to the tax system, but Reeves’ commitment to her self-imposed fiscal rules means rumours about hikes at the Autumn Budget will inevitably start to gather pace.

The chancellor is believed to be at risk of missing her slender headroom, and higher taxes is one way to balance the books. The problem is that after revealing a £40 billion tax-raising package at last year’s event, Reeves has fewer levers to pull.

On a more optimistic note, broader changes to ISAs and much-needed pension reform could be unleashed in a few months’ time, building on the groundwork laid out today and shunting the government’s goal of improving consumer outcomes further down the track.