Cash Isa Petition

innovate

jimjames wrote: »

I've not seen the HMRC numbers but you are assuming a single year, it would only take 5 years for that to be the £2 billion.

I was assuming a single year in my numbers because dunstonh was talking about a £2bn a year cost

dunstonh wrote: »

And who is going to pay for the extra £2 billion a year cost?

jimjames wrote: »

On the other hand if the benefit to the taxpayer is only £34 doesn't that mean that the petition is a waste of time for most people?

If you take that argument to its logical end, then there is no point in cash ISAs, full stop. I have seen some people make that argument, not sure whether you were amongst them.

However, if dunstonh's £2bn a year figure is the right figure to use, the benefit to an individual tax payer would of course be much higher.....

I have no idea what the correct numbers are for the annual costs - just trying to make some sense of the £2bn because I can't see how this number has been arrived at.

dunstonh

My post #6 took figures off the link. I cant find the link right now but take a read of #6 which were lifted from the source.

Paul_Herring

MoneySaverLog wrote: »

The same people who are flooding the banks with cheap money, through "funding for lending" scheme that will release £80 billion to banks and building societies over the next 18 months.

"Funding for lending" are loans from the [STRIKE]government[/STRIKE] tax payer. The cost to the [STRIKE]government[/STRIKE] tax payer to implement the proposed ISA changers would not be a loan, but a direct cost.

pqrdef

There are two big problems with S&S ISAs. One is the potential difficulty of getting out of the market in a hurry if the market goes bad, especially with packaged ISAs, and if you want to keep the tax shelter.

The other is what to do with your S&S ISA when you retire. Unless you want to play the medium/long-term bond markets, you basically kiss the tax shelter goodbye at that point, whereas your accumulated cash ISA pot continues to generate a useful tax-free income.

innovate

dunstonh wrote: »

My post #6 took figures off the link. I cant find the link right now but take a read of #6 which were lifted from the source.

I found an old document that suggests that the cost of ISAs in 2010-11 was £1.9bn, rising to £2.1bn in 2011-12.
http://www.hmrc.gov.uk/stats/tax_expenditures/table1-5.pdf

I interpret this figure as the cost of all ISAs, back from their first inception, and that the additional ISA contributions in the 2011-12 tax year add £200m to the cost to the Treasury. That £200m includes both, cash and S&S ISAs.

So, allowing the people who would want to put all the allowance into cash ISAs would most likely cost, initially, no more than £200m in a single tax year -- more likely very considerably less, for reasons outlined by myself and others earlier.

So how would Mr Osborn find another £200m (or parts of it) to reward savers? Well, he could, for example, cut the £280m a year british overseas aid to India, a country massively less indebted than the UK, and whose Finance Minster said before India doesn't need the money. Voila! Problem solved.

(I do appreciate that there would be other needy takers for that £280m, like for example the NHS. I also appreciate that there is a huge gap between rich and poor in India, but £280m would never bridge that gap, and anyway, charity begins at home)

jimjames

pqrdef wrote: »

The other is what to do with your S&S ISA when you retire. Unless you want to play the medium/long-term bond markets, you basically kiss the tax shelter goodbye at that point, whereas your accumulated cash ISA pot continues to generate a useful tax-free income.

This is something I've been puzzled about. I'm not retired yet but I can't see that on retirement day I will suddenly sell all S&S ISAs to cash. If I have been happy with S&S investments to that point then with the potential of 20+ years retirement ahead then surely keeping S&S would actually be a better strategy to ensure your income keeps pace with inflation?

innovate

jimjames wrote: »

This is something I've been puzzled about. I'm not retired yet but I can't see that on retirement day I will suddenly sell all S&S ISAs to cash. If I have been happy with S&S investments to that point then with the potential of 20+ years retirement ahead then surely keeping S&S would actually be a better strategy to ensure your income keeps pace with inflation?

I know it's a bit of a scary thought - - but try to wind the clock forward a bit further. At some stage, you don't have 5-7 or however many years left to wait for your investment to recover from any downturn you may have experienced.

Of course, when exactly you run out of years nobody knows, and it is a very personal decision when to move from investments to cash, and to what degree. If you don't want to move anything to cash - fine (and you can keep your tax advantage). It should be equally fine for someone to decide to move all their money into cash, also keeping a tax advantage.

gadgetmind

dunstonh wrote: »

in 2011/12 there wsa £54 billion put into ISAs.

Just over £1000 per adult going in.

The market value of ISAs at the end of 2010/11 was £385 billion (up from 343 billion at the end of 2009/10.

Given an average of seven grand each in there.

Either people aren't using ISAs because they like paying tax or people aren't keeping much of a cash buffer on hand.

innovate

Found a detailed and quite current ISA stats document: http://www.hmrc.gov.uk/stats/isa/isa-statistics-april-2012.pdf