MSE News: Call to raise cash Isa limit

Rather then raising the amount that can be saved, it would be better if we could get better interest rates for the Cash ISAs that we already have. It's a yearly merry-go-round to carry out transfers as the promotion rate has ended after a year etc.

Strangely enough, I wrote to my local MP about this very issue (amongst other ISA-related issues) as I agree that the current rules are unfair to cash ISA account holders.

I personally have opted for a Stocks & Shares ISA over the past 5 years or so because it offers me a more generous allowance, but I really can't understand why there's such a difference in allowances between the two types of ISA.

The reply I received from the government states that "the higher 2011-12 subscription limit of £10,680 for investment in stocks and shares reflects the increased element of risk and the larger sums generally involved in such investments. As such, the regime is designed in part to encourage savers that have already built up a buffer stock of cash savings to diversify their assets. In keeping with this objective, it is also possible to transfer cash funds invested in the ISA in previous tax years to the stocks and shares component."

I personally think that this is twaddle.

The other side of this same coin is:-

(a) Why do many of the 'best-buy' Cash ISAs not allow transfers in?

and

(b) Why do many of the 'best-buy' Cash ISAs often pay a lower interest rate than the 'best-buy' taxable (i.e. non-ISA) savings accounts?

What I would really like to see is a government-hosted ISA Wrapper account (ISAW) with which you can nominate one or several accounts as part of your annual ISA allowance. Then, the idea of savings accounts being 'ISA-compatible' or alternatively ISA-compatible accounts not allowing transfers in would become a thing of the past. Instead, you simply assign any savings accounts/share accounts etc to your ISAW (up to the maximum allowance each year). Simples.

What a load of twaddle. Why do we want to encourage people to save to invest in an already overinflated housing market? Increasing the ISA allowance only goes to give tax advantages to the wealthy. The current annual ISA allowance is more then enough for most people. I'd rather the Government put an overall cap on the amount that can be held in an ISA.

This Government abolished Education Maintenance Allowance because it was untargetted. ISAs are even more untargetted - the vast majority of the money would be saved anyway - and about three times as costly as EMA was.

The majority of the cost of ISAs is from Cash ISAs, S&S ISAs cost very little to the exchequer so there is no chance of putting up the Cash ISA allowance, and if he did that would mean more cuts elsewhere to pay for it.

In an economy with little growth we want to be encouraging people to spend not withdraw their cash from circulation.

AirlieBird wrote: »

In an economy with little growth we want to be encouraging people to spend not withdraw their cash from circulation.

That's what they would like you to do, those who are smart though would continue to save for the future. Buying a house is not just for the wealthy and a cash ISA is a good way of saving, risk free compared to sticking it in a S&S ISA.

I say bring on a single ISA allowance that you can either save into a cash ISA, put into S&S or split between the two. Limiting the cash element of the ISA is penalising people who don't want to put their hard earned cash at risk on the stock market.

Good point, obviously they want peoples money :-)

Edit: A post which this was a reply to has some how got deleted, which makes my comment seem silly. But the question was originally asked about if the cash ISAs were so cumbersome and expensive by the banks then why ask for the limits to be raised. Or something along those lines.