The recommendation is part of a report published today by the ABI, which proposes steps the Government should take to encourage savings and financial security.
One proposal is for the Government to launch a public awareness campaign to promote the benefit of long-term saving and discourage consumers from building up debt.
The campaign would focus on the benefit of long-term investments rather than short-term cash deposits and so the ABI is proposing that while the Isa limit should increase to £9,600, no more than £3,600 should be in cash.
The ABI also suggests there needs to be more encouragement for consumers to save up towards long–term care.
As part of the report the ABI is calling for the Government to do more to help business by introducing clear protocols for consultation on tax changes to avoid certainty and “end ill-considered tax measures”.
It is also proposing changes to the taxation of overseas earnings to encourage UK headquartered companies to bring profits made offshore back to the UK, through the foreign profits review.
The ABI says there should be improvements to the personal injury compensation scheme to encourage claims to be resolved more quickly so that people are able to get back to work faster at less cost to the taxpayer.
It also calls for UK business to invest more in the health of their employees.
ABI director general Stephen Haddrill says: “The Pre-Budget report in the autumn is building up to be one of the most crucial in modern times. As Parliament rises we hope this report will contribute to the work that will go on over the summer.
He adds: “The insurance industry plays a key role in a number of policy areas as well as being a major employer and third highest payer of corporation tax. As such we are uniquely placed to work with the Government to address risks it will find increasingly difficult to bear.”