Budget 2009: Cash Isa Limit Increased

adambro

harz99 wrote: »

The sentiments being expressed in this thread are a joke - with rates and returns as low as they are, an extra 6 months tax free on a maximum £3k each for the over 50s is hardly going to make a lot of difference!!!!!!

It isn't "an extra 6 months". It is an opportunity to use an additional £3k ISA allowance. Once the money is in an ISA it can be there forever, not just six months, so anyone over 50 will forever be benefiting from been able to contribute another £3k assuming they take it up. As I've already said in this thread or one of the other duplicates, it doesn't matter whether the additional allowance becomes available months, weeks, or days before the next tax year, it still offers potentially significant benefits.

As you note, interest rates are currently low but there are two reasons why that doesn't really change the potential benefits of this extra allowance. Firstly, interest rates will inevitably rise and so anyone over 50 who took this opportunity will have an extra £1.5k earning interest at any future higher rates. Secondly, you have completely overlooked the possiblity of the £3k being invested in stocks and shares where much greater returns can be achieved.

Perhaps you might to reconsider your comments on the basis of this information.

david78

Its certainly a valuable benefit if someone has the cash to make use of the extra allowance, and maybe younger people will feel agrieved at the proposal. However, 50 year olds will most likely have fewer ISA years ahead of them than your typical 20 year old. (they will either take the money out to live on or die).

I think people should calm down. There's plenty of time between now and 6th October for the providers and HMRC to change things so that all can contribute, regardless of age. I expect the providers will be pushing hard for this.

baby_boomer

DawnW wrote: »

Free buses, trains, heating? What is that all about?

Have you not noticed the election looming in 2010 ?

The "temporary" heating allowance boost (maintained for 2009) is a great electioneering ploy.

If a future Tory government reduces it (as Labour probably would have had to anyway) then it is the Tories cutting pensioner benefits.

What a budget. How can Darling make 98% of us be better off, even though he is spending £billions to boost the economy and additionally is £10 billions more in debt than you could ever imagine.

Surreal.

All the serious pain is being reserved for the next government so that electors blame it :rotfl:

It would almost be a laugh if Labour were reelected and had to live with their own figures & forecasts.

gcw84

harz99 wrote: »

The sentiments being expressed in this thread are a joke - with rates and returns as low as they are, an extra 6 months tax free on a maximum £3k each for the over 50s is hardly going to make a lot of difference!!!!!!

Again, you've missed the point. Yes, if rates stay the same then those who can subscribe to a Cash ISA in October will gain very little in interest.

However, consider two people, Mr X who is over 50, and Mr Y who is 25. Think only about Cash ISAs for a minute. Let's say that both Mr X and Mr Y fully subscribed to their Cash ISAs for 2009-10 on 5 April this year, so currently neither of them can invest any more and they both have £3,600 invested. Now, on 5 October, Mr X gets to put another £1,500 into his ISA, but Mr Y is prevented from doing so by Darling's discrimination. On 5 April 2010, both Mr X and Mr Y can subscribe £5,100 to their ISAs.

Now, consider their ISA balances:

Mr X: £10,200 (= original £3,600 + £1,500 + £5,100)
Mr Y: £8,700 (= original £3,600 + £5,100).

If we assume that Mr Y had the money to subscribe an additional £1,500 to his ISA in October 2009, and was prevented from doing so only by Darling's disgrace, then he has been paying -- and will continue to pay -- tax on the interest he earns on that, wherever he's put it.

This means that as interest rates improve, more of Mr X's money is protected from the taxman than Mr Y's, solely because of this discrimination in allowing over 50s to subscribe before under 50s.

So, whilst in the short term Mr X will gain very little financially, in the longer term the gain is likely to be considerably bigger.

And, this doesn't even take account of stocks and shares side of the ISA, which at least doubles the benefit by allowing Mr X to have £3,000 more than Mr Y protected from the tax man!

Ultimately, though, the size of the gain is irrelevant: it's just not fair, plain and simple and we don't tolerate discrimination in this country!

baby_boomer

The budget is a lie.

We will all have to pay far more for the bank bail outs and the reduced growth for a couple of decades.

The next government (Tory/LibDem/Labour/Coalition) will have to look far and wide for taxes to pay off its debts.

It therefore makes sense to put as much as possible beyond the reach of the taxman whether in cash ISAs or share ISAs or both .

adambro

gcw84 wrote: »

Ultimately, though, the size of the gain is irrelevant: it's just not fair, plain and simple and we don't tolerate discrimination in this country!

I share you disappointment about this and hope it is changed but to argue against it on grounds of discrimination is pretty nonsensical. It certainly is discrimination despite those who try to suggest not but it isn't necessarily against the law to discriminate against certain people and nor should it be. Shouldn't the government be able to set a minimum or maximum age for anything?

In this case the idea is to target a particular section of society with age being the deciding factor. I have no problem with this in essence, my issue is simply that targeting this particular benefit in this way isn't appropriate. Doing so brings additional complications for both the public and ISA providers and doesn't recognise the importance of encouraging wider society to save, particularly those trying to find a deposit for to purchase their first home despite first time buyers being of crucial importance to the depressed housing market. Implementing the change for everyone at once wouldn't be particularly costly for the government in the grand scheme of things.

Jennifer_Jane

gcw84 wrote: »

It is absolutely unforgivable that this increased limit is being introduced for over 50s first.

What's age got to do with it?
Why shouldn't it be introduced across the board?

I appreciate that it's not going to make a massive difference initially, but the cumulative effect will be greater, and I don't see the relevance of age.

Yet again, students like me get a poor deal whilst the older residents of the country get endless help with one scheme and another.

I shall be writing to my MP to protest this announcement, and would encourage others to do likewise. We could start an MSE campaign...:money:

How much money are you putting into an ISA this year, and when were you planning to do it?

Most ISA advertising is in the 6 weeks prior to 5th April, so it seems to me that most people only think about their ISA's just before the deadline.

I don't see the point of restricting it to over-50's for 6 months, and I think the Budget in general was full of silly little things that don't mean much, whilst the big things have been hidden (the 61% tax rate that has happened because of the removal of personal allowance for people on over £112,000).

I don't understand the reasons for some of the things in the budget, but Labour are just mucking things up for themselves and will probably be out in 2010.

I just don't understand the passion that this ISA increase for over-50's for 6 months has caused on this thread. I'd be interested to know why.

Jen
x

Jennifer_Jane

adambro wrote: »

It isn't "an extra 6 months". It is an opportunity to use an additional £3k ISA allowance. Once the money is in an ISA it can be there forever, not just six months, so anyone over 50 will forever be benefiting from been able to contribute another £3k assuming they take it up. As I've already said in this thread or one of the other duplicates, it doesn't matter whether the additional allowance becomes available months, weeks, or days before the next tax year, it still offers potentially significant benefits.

As you note, interest rates are currently low but there are two reasons why that doesn't really change the potential benefits of this extra allowance. Firstly, interest rates will inevitably rise and so anyone over 50 who took this opportunity will have an extra £1.5k earning interest at any future higher rates. Secondly, you have completely overlooked the possiblity of the £3k being invested in stocks and shares where much greater returns can be achieved.

Perhaps you might to reconsider your comments on the basis of this information.

I'm tired and it's been a long day! But I still don't see the logic of people earning interest on their additional ISA's 6 months ahead being such an appalling thing. If it's in cash and people are lucky, say they get 3.6%, then it's 1.75%. Both over 50's and under 50's can get this, but over 50's can put it in an ISA, so they gain 20% ie .35% over the 6 months. Then the under 50's go in on April 5th with their same amount, surely they have only lost .35%? How long is money kept in an ISA for? Does anyone know what the average 'term' is? I understand that the .35% can be invested for 20 years or so, but is it really? Certainly not I think by over-50's.

Would people have preferred that the new ISA rate came in for everyone in April, which would have been the logical thing?

Re the S&S ISA - well not worth commenting on as who knows what will be happening on the equity markets. It's just,well, this could happen or that could happen. But who knows!

Jen
x

gcw84

Jen,

Please see my previous post above (number 45).

I explained there why it matters that over 50s get the extra 6 months. It's not the fact that they get 6 months' extra interest but rather that they get an opportunity to wrap £3000 extra away from the taxman...

Gary

masonic

gcw84 wrote: »

I explained there why it matters that over 50s get the extra 6 months. It's not the fact that they get 6 months' extra interest but rather that they get an opportunity to wrap £3000 extra away from the taxman...

The problem with this argument is that anyone under 50 is probably going to get the opportunity to wrap a lot more money away from the taxman by the time they reach 50 than any existing 50 year old.