Four ISA allocation solutions for under‑65 clients after the cash cut

Introduction

With the cash ISA allowance for under‑65s dropping to £12,000 from April 2027, while the overall £20,000 limit stays unchanged, advisers are entering a new era: one where clients who prefer certainty must now allocate at least £8,000 into investments if they wish to maximise their tax-free allowance.

For many, this shift is psychologically uncomfortable. And this is precisely where smoothed solutions - like Wesleyan’s Smoothed With Profits Growth fund - can become an anchor product in your advice framework.

Below are four re-engineered ISA allocation solutions.

1) Essential cash + Core smoothed growth

A default blueprint for risk-averse clients who’ve historically maxed cash.

How it works

• £12k Cash ISA

Preserve the client’s sense of safety and liquidity within the new restricted limit. Existing ISA cash remains tax-free and untouched.

• £8k Stocks & Shares ISA

Anchored by Wesleyan's Smoothed With Profits Growth fund, this creates a stable, low-volatility core for clients who would otherwise avoid investing but now must engage with it due to the new rules.

Why this solution works with a smoothed fund

The government openly intends for this policy to transition cash-heavy savers toward investment exposure.

A smoothed fund offers the ideal behavioural bridge:

• Reduces sharp price movements
• Offers a steadier growth path
• Gives previously cash-only clients a comfortable first step into investing

2) Laddered liquidity + Smoothed/equities blend

For clients who need structured liquidity but want incremental growth.

How it works

• £12k Cash ISA spread across maturities

Instant access + 1–3 year fixed rates = predictable liquidity.

• £8k Investment ISA, built as:

Core: Smoothed With Profits Growth fund

Satellite: Broad equity exposure (optional depending on risk)

Why this solution works with a smoothed fund

The policy is intended to reduce oversized cash positions and nudge long-term investing. However, many laddering clients aren’t ready to jump straight to full market volatility.

Your smoothed fund becomes the "first layer of growth":

• Offers better chance at stability
• Softens the behavioural jump to equities
• Helps preserve capital while targeting medium-term growth

It works beautifully for clients who want control over liquidity but still need their remaining ISA allowance to work harder.

3) House-deposit planner

For younger clients juggling security and inflation risk.

How it works

• £12k Cash ISA

Important for near-term house deposit security.

• £8k Investment ISA

Instead of exposing nervous buyers to full-equity risk, use the Smoothed With Profits Growth fund to provide:

a. Potential for gentle growth over inflation

b. A smoothing mechanism which aims to reduce volatility

c. A smoother experience during emotionally charged savings periods

Why this solution works with a smoothed fund

Committees and industry voices have questioned whether the cash-allowance cut will truly push younger savers into risk assets. But in practice, if they want to use their full ISA allowance, they must invest at least £8k.

Wesleyan's Smoothed With Profits Growth Fund offers many of the attributes house-deposit savers need:

• A middle ground between "too safe" and "too volatile"
• The potential to reduce inflation drag over multi-year time horizons
• A psychologically manageable investment experience

4) Pre-retirement de-risking

For late-50s to early-60s clients preparing for retirement decumulation.

How it works

• £12k Cash ISA

Supports short-term retirement cashflow and near-access needs.

Under-65s must use this smaller cap until they reach 65, when the cash ISA allowance returns to £20k.

• £8k Investment ISA

The Smoothed With Profits Growth fund becomes the natural core holding, offering:

a. Lower volatility than equities

b. More growth potential than pure cash

c. A smoother path in the final accumulation phase

Why this blueprint fits your smoothed fund

With rising tax on savings interest outside ISAs from 2027, advisers must help clients maintain tax-efficient growth without unwanted risk spikes.

A smoothed fund aims to address this need as a pre-retirement stabiliser - especially when clients are most loss-averse.

Why your Smoothed With Profits Growth Fund should be the "£8k answer"

Across all four blueprints, one truth emerges: When ISA cash is capped at £12k, advisers need a compelling, low-volatility investment option to absorb the compulsory £8k.

A smoothed fund could provide clients that are nervous about full equity exposure a growth pathway that feels familiar, controlled, and emotionally manageable - exactly what’s required in the post-Budget ISA landscape.