Mini Cash ISA Input Limits - Will they change in the future

humfer

Currently you can put £3000 each year in a Mini Cash ISA but this has been the case for many years now. Why has the government not raised this amount each year with inflation? Also Gordon Brown was desperate a couple of years ago to reduce the annual rate (hardly a policy to encourage long term saving), but all has been quiet in his last few budgets. Wonder why?

dunstonh

The Govt has raised the limits. It was initially intended to offer only £1000 per tax year but GB extended the 3k allowance until 2010.

This is also why ISAs havent had much news on the legislation front as everthing is in place until 2010.

emphatiC_hanK

In reality the process went something like this:

Gordon Brown had proposed that the £3000 cash ISA limit would be lowered from £3000, to £1000. This was a staggeringly short-sighted decision :mad: from a government that had thus far used common sense and continued the previous government's incentives to save tax-free in a similar way (ISAs following on from TESSAs.)

However, after a lot of lobbying, the Chancellor thankfully listened and reinstated the £3000 limit, that had been in place since 1999, right through to 2010.

After that time, what happens is anyone's guess! I think there is a certain reluctance to increase the £3000 limit (although by rights it should now be somewhere between £3500 and £4000 if annual inflation had been taken into account) as relatively few people use the remaining £4000 'non-cash' element of their ISA allowance, and this is something the exchequor would like to encourage.

:A emphatiC_hanK :A

cheerfulcat

No, here's what really happened; Gordon Brown could not bear to keep the Tories' excellent tax-free savings accounts ( easy to understand, generous allowances ) but Labour had promised before the election not to mess with them so PEPs and TESSAs were frozen and GB introduced ISAs ( harder to understand, miserly allowances ). He claimed when they were introduced that the allowances would be reduced after the first year or so. It was thus very easy to appear to "back down"; quieting the fuss and smoke-and-mirroring over the fact that the allowances get smaller every year.

Savers might like to note that the annual PEP + TESSA allowance was over £10,000.


At the very start of ISAs a lifetime limit on tax-free savings, including existing PEPs and TESSAs, of £50,000 was proposed by Brown but the government backed down in the face of considerable opposition. This should not be forgotten.

Currently you can put £3000 each year in a Mini Cash ISA but this has been the case for many years now. Why has the government not raised this amount each year with inflation? Also Gordon Brown was desperate a couple of years ago to reduce the annual rate (hardly a policy to encourage long term saving),

Brown is a socialist; he believes that the state, not the individual ( you ), should determine where your money is spent. He is not keen on people amassing large amounts of capital.

HTH

Cheerfulcat

superjames4

i don't think giving tax breaks to people who can afford to save over £7k a year will ever be a priority for a Labour government - at least i hope not!

meanmachine_2

The LAST thing the Chancellor wants is to encourage people to save money.

The only way this whole merry go round can continue is if people keep borrowing and spending like it's going out of fashion.

If we adopted German or Japanese levels of saving, the economy would collapse.

We might geographically be closer to Europe, but our childish spending habits are more akin to American levels of instant gratification.

Er, so in answer to your question, it's another case of Brown-ish fiscal drag - failing to raise the tax free limit in line with earnings, or even in line with the official, heavily massaged CPI figure.

dunstonh

Remember as well that the cash ISA was never initially designed to be sold by banks and building societies. It was a savings scheme designed to be sold through checkouts at supermarkets by encouraging people to add some money each week to their savings plan. Once the supermarkets realised they couldn't make a profit out of it due to the technology, money laundering requirements, FSA regulation and withdrew, it was left to the banks and building societies who said they wouldn't do it if it was just £1000. Hence the increase to £3k.

Many believe that although GB wanted it lower, he had the choice of either keeping it at £3000 or watch the Cash ISA fail. With Stakeholder pensions already failing, he couldn't afford for the cash ISA to fail from a political point of view.

humfer

cheerfulcat wrote:

Brown is a socialist;
Cheerfulcat

Thats sure right and just imagine what he will get up to when Blair goes. I think it stinks that anything people try to do (get a big pot of savings or buy an extra house to sell in their own age) his first instinct is to ruin it. Especially after the near destruction of the private pension schemes which he has taxed £50 billion since 1997. Anyone would think he wanted people to be poor in their old age!!>>>>>!!

thor

emphatiC_hanK wrote:

In reality the process went something like this:

Gordon Brown had proposed that the £3000 cash ISA limit would be lowered from £3000, to £1000. This was a staggeringly short-sighted decision :mad: from a government that had thus far used common sense and continued the previous government's incentives to save tax-free in a similar way (ISAs following on from TESSAs.)

I could not give a fig about stock market element of Tessas or ISAs. The stock market is gambling so I don't invest in it. As for the cash element of ISAs, it is superior to a Tessa which only allowed you to save £9000 over 5 years compared with 3k per year for a mini cash ISA. You can save and avoid paying tax more in a mini cash ISA. It may be fashionable to look back on Tessas through rose tinted spectacles but replacing them was a good thing.

PBA

thor wrote:

I could not give a fig about stock market element of Tessas or ISAs. The stock market is gambling so I don't invest in it.

Investing in cash is also gambling. If your cash ISA pays 5% but the stock market goes up 6% you have taken a gamble and lost.

Paul_Herring

PBA wrote:

Investing in cash is also gambling. If your cash ISA pays 5% but the stock market goes up 6% you have taken a gamble and lost.

I think you'd find they're using the term 'gambling' to indicate that they don't like to take risks - savings are virtually guaranteed to rise, and never fall (in amount - inflation's intriduces other problems) due to their low risk nature. I think you'll find the stock market doesn't have this guarantee.