Cameron makes savings tax pledge

Sapphire

Sir_Humphrey wrote: »

Cameron's incentive benefits people who live off capital (rentiers) at the expense of those who actually work for a living.

This is simply not true. I work for a living and am a saver – the proposals when brought into effect will help me and others in my family, most of whom are basic rate taxpayers. None of Brown's policies over the last 10 years – or the disastrous actions (or lack of action) of him and his cronies – have done so. I have always thought that savers should not be taxed on savings when they have already paid tax on the money they put into their savings.

Encouraging people to save will also put money into banks and thereby hopefully help the economy.

Anything that can be done to help pensioners who are BRTs, and who have been prudent and tried to save independently for their later years, is also welcome as far as I am concerned.

WTF?_2

chewmylegoff wrote: »

but how much will it really help?

at current interest rates - say 3.5%, we're talking for every pound you have saved over and above the ISA limit, that you cannot transfer into your current year's ISA allocation, this measure would benefit you to the tune of an extra 0.7p in your pocket.

Yes - at current rates.

These sorts of insanely low rates however are not sustainable and will bounce back, sharply, making tax free savings considerably more useful in the not too distant future.

Furthermore, since interest earned is so low at the moment and therefore tax from it too, this is a very sensible time to implement the measure as the government isn't going to face a big shortfall as a result of doing so.


There is a very real problem with a lack of savings in the country - not just impacting individuals but also affecting the banking system - and this has been worsened by government policies which essentially have penalised savers and done everything to help those who got themselves into debt.

A move like this is extremely welcome. It sends the right general message (we need to save more and borrow less to get out of this mess) and it encourages people to be sensible with their cash.

Guy_Montag

Savings example for us all

Seems to me that:
A) Banks need to rebuild their balance sheets, so need savers.
The culture needs to change, so that people save now to buy later rather than buy now & pay (more) later.
C) Saving or spending it's going to be a long & painful recession.

Not sure that this is the best policy, but I agree with NickM, making all basic rate savings effectively ISAs aids the poor as much as anyone else. Most wouldn't bother with an ISA, but will have a savings account of some sort.

chewmylegoff

!!!!!!? wrote: »

Yes - at current rates.

These sorts of insanely low rates however are not sustainable and will bounce back, sharply, making tax free savings considerably more useful in the not too distant future.

Furthermore, since interest earned is so low at the moment and therefore tax from it too, this is a very sensible time to implement the measure as the government isn't going to face a big shortfall as a result of doing so.


There is a very real problem with a lack of savings in the country - not just impacting individuals but also affecting the banking system - and this has been worsened by government policies which essentially have penalised savers and done everything to help those who got themselves into debt.

A move like this is extremely welcome. It sends the right general message (we need to save more and borrow less to get out of this mess) and it encourages people to be sensible with their cash.

i agree with the message that people should save, it's a good message there's no doubt about that.

however, i don't see how this policy actually provides people with extra incentive to save over and above what already exists.

this policy, as far as i am concerned, is about as revolutionary as labour scrapping TESSAs and replacing them with cash ISAs. it's all about claiming the credit for something which already exists.

nickmason

chewmylegoff wrote: »

i agree with the message that people should save, it's a good message there's no doubt about that.

however, i don't see how this policy actually provides people with extra incentive to save over and above what already exists.

this policy, as far as i am concerned, is about as revolutionary as labour scrapping TESSAs and replacing them with cash ISAs. it's all about claiming the credit for something which already exists.

I almost agree with you - except that this switches the tax-free status from "opt-in for the initiated" to default, which is arguably revolutionary (in the sense of full circle ). Currently savings are taxed unless you're smart. Under this policy savings aren't (unless you're rich).
(And as I keep banging on, it's a difference of philosophy/mood/style as much as policy).

WTF?_2

chewmylegoff wrote: »

i agree with the message that people should save, it's a good message there's no doubt about that.

however, i don't see how this policy actually provides people with extra incentive to save over and above what already exists.

this policy, as far as i am concerned, is about as revolutionary as labour scrapping TESSAs and replacing them with cash ISAs. it's all about claiming the credit for something which already exists.

ISAs only give you about 3.6k p.a. of tax free cash saving allowance for your capital and are inflexible regarding withdrawals. This proposal would expand the tax free savings amount considerably. Also, you lose all the benefits of the ISA when you withdraw any cash (can't be replaced tax free) so that's a lot more flexibility for day to day saving.

If you sit down and look at the benefits of saving over the long term, then building up a pot of cash in a 'risk free' way in the bank becomes a lot more attractive when you don't have tax eating away at your compounding interest.

It also benefits the bank as they can be better capitalised by depositors and don't need to depend on the markets for their funding, as happened since 2000 as savings dropped off and borrowing from the credit markets took off - precipitating this current mess where banks have such a huge shortfall.

More savings are better news all around - for individuals, the banking system and ultimately the entire economy. Right now the focus by the government is encouraging lending/borrowing ... after a bust caused by too much borrowing. Bonkers.

Sir_Humphrey

Sapphire wrote: »

This is simply not true. I work for a living and am a saver – the proposals when brought into effect will help me and others in my family, most of whom are basic rate taxpayers.

Unless they are made unemployed as a result of having too little spending in the economy. Or have their income reduced as a result of having too little spending in the economy. I have large savings for someone of my income as a result of saving for a house deposit. With house prices falling by thousands a month, with inflation nailed (it is not as though 5% is really that high), losing a couple of hundred pounds of interest a year is not that big a deal for me. And as a diligent saver, the Tory plans would not help me anyway, as all my savings are tax free in an ISA.

carolt

nickmason wrote: »

I almost agree with you - except that this switches the tax-free status from "opt-in for the initiated" to default, which is arguably revolutionary (in the sense of full circle ). Currently savings as taxed unless you're smart. Under this policy savings aren't (unless you're rich).
(And as I keep banging on, it's a difference of philosophy/mood/style as much as policy).

Absolutely.

For example, I have savings accounts for all of my children - clearly not taxpayers!

Yet due to a mix-up, one of the R85 forms went missing when I opened an account, meaning that 6 years on, my DD's still owed tax on some of her savings. I know I can reclaim the tax, but it's a hassle and still haven't got round to it.

Two points arise from this:

1. She is a non taxpayer, so has always been entitled to the tax back - basic rate taxpayers currently aren't.
2. I'm savvy enough to know to ask for an R85 for her and to know that I can reclaim the tax - but even then, it's a huge amount of hassle. Many people wouldn't even know that they could get savings untaxed or know how to go about it, even if they were aware of it.

Saying poor people can have ISA's is true, but sort of misses the point, that they won't, even if they have savings, because they won't know about them or how to access them if they do.

More financial literacy taught in schools would be a great start, BTW.

nickmason

Sir_Humphrey wrote: »

And as a diligent saver, the Tory plans would not help me anyway, as all my savings are tax free in an ISA.

I think one of the interesting aspects of this is that it signifies a shift from benefits for the diligent (ie "insiders", typically middle class) to all.
I know that this seems extraordinary to those who see the conservatives as self-serving, but it really doesn't surprise me given what I know of the core ethos and philosophy behind the conservative party, made more visible under Cameron.

Sir_Humphrey

nickmason wrote: »

I think one of the interesting aspects of this is that it signifies a shift from benefits for the diligent (ie "insiders", typically middle class) to all.
I know that this seems extraordinary to those who see the conservatives as self-serving, but it really doesn't surprise me given what I know of the core ethos and philosophy behind the conservative party, made more visible under Cameron.

There is absolutely nothing to stop working class people from using ISAs except for not knowing about them and not having the money to put into them. To encourage working class people to save, their incomes have to be protected (via lower IRs and fiscal stimulus) and they need to be told about ISAs. This is just about helping the fairly-well-off retired Daily Mail readers to make a little more money at the end of the year. And that is being charitable to him, as what Cameron is proposing will make sweet FA difference to saving patterns anyway. If you lose your job you cannot save, whatever the tax incentives.