MSE News: Cash Isa limit should be raised, says Nationwide

Spiggle

VT82 wrote: »

I work for a company that would benefit from what the Nationwide and the Building Societies Association are asking for. I have also never used my S&S ISA allowance. But, playing Devil's advocate and leaving my own interests to one side, I disagree with the recommendation for the following reasons:

• Money in cash ISAs in a bank or building society can only be used to fund house purchases, whereas money in Stocks and Shares ISAs can be used to fund all kinds of businesses in the real economy.
• It costs the Government, i.e. the taxpayer, less to subsidise the capital gains tax on investments than the (higher 20/40%) income tax on savings interest.
• S&S ISAs should provide long term better returns than cash ISAs. So by saying 'use it or lose it' on the S&S ISA allowance, the policy is effectively being cruel to be kind.

Surely that is an ideologically specific definition of a 'real economy'. There are others who may suggest that it is the markets and the 'funny money' they play with that so severely affects those of us living in a different definition of the 'real economy', where cash balances may be used to purchase real goods, services, trades, etc., locally. As has alreay been stated, house buying is not the only purpose of cash savings.

Just a personal thought.

innovate

VT82 wrote: »

Money in cash ISAs in a bank or building society can only be used to fund house purchases

Did you mean to say that? Some unsuspecting newbie might think it is true.

xylophone

Did you mean to say that? Some unsuspecting newbie might think it is true.

Judging by the context, I should think that the OP means that money deposited in building society cash ISA accounts is largely lent for house purchases whereas money invested in s&s isas funds the expansion of all manner of businesses?

VT82

Yep that's what I meant. Sorry for any confusion.

Fishbowler

I agree with the OP. Whilst they shouldn't be ignored, a benefit for savers paid for with the money cut from welfare seems somehow tainted. And ultimately unlikely.

jimjames

marathonic wrote: »

How is a saver "hard-pressed" if the Cash ISA limit for 2013/14 of £5,760 isn't enough for them?

That's what puzzles me too. Not sure how an organisation can justify promoting more tax breaks for the rich.

The average wage in the UK is around £24k so that means someone would be using over 20% of their gross salary per year in ISA savings which seems rather unlikely. The example about approaching retirement needing to move into cash is rather misleading too. Some people may want to do that but with 25 years plus of retirement ahead for many people having a higher equity proportion may well be sensible.

gadgetmind

jimjames wrote: »

The average wage in the UK is around £24k so that means someone would be using over 20% of their gross salary per year in ISA savings which seems rather unlikely.

Everyone is different. Some like to live hand-to-mouth and spend all of their pay packet (and more) on a monthly basis. Some like to save for houses, retirement, rainy days, whatever.

Trying to impose a one-size-fits-all solution on people is rather missing the point that we're all different and have different goals, different attitudes to different asset classes, etc. The average UK wage tells you very little about the average UK people and close to zero about the range of saving and investment needs they have.

I have no desire to put more than £5760 pa into a cash ISA but no way would I try and tell someone else that they shouldn't be allowed to do this with their already heavily-taxed income.

stinktankcynic

If the government decided to reduce isa allowances and the banks lowered interest rates, they would have all the cheap cash they need to lend to businesses.
People would spend cash that was not earning them anything or invest in pensions. Banks win, government wins, insurance firms win. Saver loses.

MoneySavingUser

stinktankcynic wrote: »

Saver loses.

Seems to be a permanent state for savers!

innovate

stinktankcynic wrote: »

People would spend cash that was not earning them anything or invest in pensions. Banks win, government wins, insurance firms win. Saver loses.

Investing in their retirement income (aka pension) is intelligent use of people's money. A definite winner.