Chartered financial adviser The Private Office has warned the Government against cutting the Cash ISA allowance, saying that doing so will fail to drive more risk-based investing.

There are suggestions that Chancellor Rachel Reeves is mulling a cut to the £20,000 cash ISA allowance, potentially in her Mansion House speech next week.

The move would be designed to nudge people to invest more for better returns and to support UK investment.

However, The Private Office says that its research suggests investors are using cash as a deliberate wealth strategy, not a fallback to avoid equity investing.

According to new research by the firm over 53% of 4,300 adult savers surveyed said retirement, or approaching retirement, was the main reason for holding cash, with just 11% citing a lack of investment knowledge for the reason they were holding cash.

Half (51%) of savers said they keep some cash for immediate access in emergencies, with 76% seeing earning a competitive interest rate on cash as a central part of their long-term financial strategy.

There has been speculation ahead of the Treasury’s anticipated ISA reform announcement in this month’s Mansion House speech, that the Government plans to cut the annual Cash ISA allowance to try drive more risk-based investing.

Anna Bowes, personal finance expert at The Private Office, said the use of Cash ISAs was a key element to many clients’ financial plans, and penalising those who use them to manage their money efficiently feels counterproductive.

She said: “This is not about avoiding investment. It’s about appropriate risk management and liquidity planning. Stripping back the ISA allowance for cash savers risks alienating a population that is actively trying to do the right thing with their money.”

The Private Office surveyed 91 financial advisers for their views on the use of cash in wealth management strategies. Four in five (80%) said they regularly discussed cash strategy with clients as part of their wealth planning.

Advisers said many clients prioritised security and accessibility over returns, but also said that between 25% and 50% of their clients have cash in accounts paying under 2% interest.

• The Private Office surveyed 4,360 UK adult savers and 91 financial advisers in April.