New Government Supported Saving Scheme For Those on Low Incomes

afwone

glider3560 wrote: »

Not really. Anyone can open an ISA with £1 and continue to contribute to it throughout the year - you don't have to be well off to have an ISA.

Sure, anyone can open an ISA, but just what are the benefits for those on a low income?

Any advantage from having a shelter from income tax or capital gains tax liability is likely to be marginal. There is also a trend now for some of the best rates for transferring an ISA to be for those with the larger sums invested. As for Stocks and Shares ISAs, forget it. Administration fees, dealing costs and exit fees will account for too large a proportion of the sum invested to make them worthwhile unless you have a reasonably sized portfolio of shares or bonds.

For those who can use the ISA to avoid paying 40% tax or more on investment income, it is a useful scheme. Those on a lower income have been at a disadvantage when it comes to saving.

cashbackproblems

afwone wrote: »

Sure, anyone can open an ISA, but just what are the benefits for those on a low income?

Any advantage from having a shelter from income tax or capital gains tax liability is likely to be marginal. There is also a trend now for some of the best rates for transferring an ISA to be for those with the larger sums invested. As for Stocks and Shares ISAs, forget it. Administration fees, dealing costs and exit fees will account for too large a proportion of the sum invested to make them worthwhile unless you have a reasonably sized portfolio of shares or bonds.

For those who can use the ISA to avoid paying 40% tax or more on investment income, it is a useful scheme. Those on a lower income have been at a disadvantage when it comes to saving.

Well even those on low incomes pay some level of tax, therefore surely they benefit more from tax breaks as they get to keep a greater level of interest which is more valuable?

I think what your questioning is the fact that higher earners save on their savings, but isnt that offset with them paying more tax generally (40%)? You cant penalise those who have worked hard and contribute alot to the economy as these are the people who provide jobs etc.

Im not a higher tax payer or even earn that much but invest in a stock and shares isa and make money, dealing costs nowadays are small (with iii.co.uk where buying in advance is free, no annual costs and £10 selling fee).

afwone

cashbackproblems wrote: »

Well even those on low incomes pay some level of tax, therefore surely they benefit more from tax breaks as they get to keep a greater level of interest which is more valuable?

I think what your questioning is the fact that higher earners save on their savings, but isnt that offset with them paying more tax generally (40%)? You cant penalise those who have worked hard and contribute alot to the economy as these are the people who provide jobs etc.

Im not a higher tax payer or even earn that much but invest in a stock and shares isa and make money, dealing costs nowadays are small (with iii.co.uk where buying in advance is free, no annual costs and £10 selling fee).

We are moving a bit off topic. I simply wanted to say that I welcomed a new savings scheme that provided a real incentive for those on low income to save. I suspect that the overall costs of the scheme are low compared with those for which higher income groups may be expected to derive much greater benefit.

For what it is worth I am not criticizing the ISA scheme in principle, and have no problems with those of us in higher rate tax bands sheltering savings. Just that there has been a gap in provision for those on lower incomes.

Is the new scheme the answer? Let us see, and let it be assessed outside of a general election campaign!

[There are other threads on the workings of ISAs and from them I have learned about iii and HL. I am in the process of transferring various S&S ISAs across to these providers that I had subscribed to and forgotten about. Seeing the hundreds of pounds in administration fees I have been paying, and the high exit fees for some quite modest accounts has been an eye-opener.]

Eco_Miser

10_66 wrote: »

What a patronising statement.

I thought it was sarcasm.