Cash ISA savers are being urged to consider alternative options for their money as a cut to limits to just £12,000 could be announced this Wednesday, experts have warned.

Finance and investment firm AJ Bell says there are reports that Cash ISAs could be slashed from their current £20,000 limits to just £12,000.

Cash ISAs, which allow savers to put money away and hide it from tax each financial year, have been the subject of scrutiny all year. At one point, rumours suggested the limit could be set as low as £10,000.

While Chancellor Rachel Reeves shied away from making changes to Cash ISAs earlier this year, Laura Suter, director of personal finance at AJ Bell, has set out that there are reports that a £12,000 limit could introduced in the Budget this Wednesday.

She said: “The government is rumoured to be looking at restricting the amount of cash that people can hold in an ISA in next week’s Budget. Nothing is confirmed, but some reports claim the cash portion of the annual ISA allowance will be restricted to £12,000 from the current £20,000. Investors would be able to put the balance (or more) in a Stocks and shares ISA, but not in cash.”

Savers who would usually exceed that amount will need to find alternatives before the change is put in place. Fortunately, stocks and shares generally ‘significantly’ outpace cash.

She continued: “Many who would otherwise have stuck that money into a Cash ISA may be looking for alternatives providing lower risk, cash-like returns.

“Recent figures from AJ Bell highlighted that investment returns have significantly outpaced cash since ISAs were launched in 1999, with investors more than tripling their money, while cash savers barely beat inflation.

“However, investing doesn’t have to be full risk, there are lots of lower risk, cash-like alternatives people can invest in through their stocks and shares ISA.”

Ms Suter added that savers looking for alternatives could investigate money market funds, bond fund and UK treasury bills as well as short-dated bonds or a multi-asset fund instead.

She added: “Money market funds have boomed in popularity in recent years and invest in short-term debt like bank deposits, government loans and corporate loans. The managers of these funds will select a mixture of different investments to manage the money on your behalf, aiming to preserve your money while giving a cash-like return.”

Bonds, are basically a loan, except you’re lending your money to governments and companies, instead of you borrowing from them.

In return, you get regular interest payments and the original outlay back at a set point in the future.

Rates have risen in recent years, making them a more attractive prospect.

About short-dated bonds, she said: “Investors don’t have to buy a fund, they can invest in bonds themselves. For example, in recent years we’ve seen an uptick in the number of investors buying gilts (UK government bonds). Short-dated bonds are bonds that will mature (so repay the investor) in a short time, usually under two to three years. Because they are short-term, they are less sensitive to interest rate changes.”

She added: “Treasury Bills (or T-bills) are short-term loans to the UK government. When you buy one, you’re effectively lending money to the government for a few months – typically one, three or six months. Rather than paying interest, they’re sold at a discount and repaid at face value. So, if you buy a £1,000 T-bill for £980, you’ll receive £1,000 when it matures, with the £20 difference being your return.”

Finally, multi-asset funds are basically an instant, diversified portfolio of investments.

Most private pensions are effectively this already; a portfolio of different options with different risk levels, or different growth targets over a set timeframe.