Investment platforms and building societies are clashing over how to classify ‘cash-like’ assets under new Individual Savings Account rules. The dispute centres on whether money market funds, which invest in short-term debt, should receive the same tax-free treatment as traditional cash deposits. This regulatory grey area is creating friction in the UK savings market.

The disagreement stems from the government’s push to modernise Isa rules, aiming to broaden investment options while protecting savers. Platforms argue that money market funds offer stability and liquidity comparable to cash, making them suitable for tax-free wrappers. Building societies counter that these funds carry more risk and could undermine consumer protection.

This clash has significant implications for product design and customer choice. If money market funds are deemed cash-like, platforms could launch new Isa products, potentially attracting more capital. Conversely, a restrictive definition would limit innovation and keep savers in lower-yielding deposits. The Financial Conduct Authority is expected to intervene, but its final guidance remains pending.