ISA's under threat

frugal90

Has anybody heard the rumour that ISA's might be under threat?

next year they go up to £11760 but a few web articles make me quite worried?
http://www.mindfulmoney.co.uk/uncategorized/threat-of-lifetime-limit-on-isas-it-may-be-wise-to-use-your-maximum-isa-allowance-while-you-can/

alanq

Cash ISAs are under a bigger threat from financial institutions that pay low rates that mean that standard rate tax payers can often get a better return elsewhere even after paying tax on their interest.

There was a time when ISA accounts tended to pay more than the gross rate of corresponding non-ISA accounts.

Archi_Bald

I asked my MP, who is a Government Minister, when the original article about this appeared in the Daily Telegraph. The response I got was

Thank you for your email about ISAs following a report you have recently read in the Daily Telegraph. I understand your concern about issue of a cap but as the article states, the Treasury has gathered information in this area, but no proposals are actually being put forward by officials or Ministers.

It is worth emphasising that we are committed to helping people with ISAs and have already put in place a number of measures to improve them. ISA subscription limits have been indexed-linked to inflation from 2011-12. From April this year, people have been able to save an extra £600 a year into their ISA including an extra £300 into their cash ISA and the Government has worked with industry to improve competitiveness and transparency in the ISA market. This includes measures that now mean transferring a cash ISA to another provider now takes no more than 15 working days.

I will bear your comments in mind if and when any proposals for Isas are discussed but in the meantime I hope I have been able to set your mind at rest.

So it looks ISAs contributions will be safe for another year at least.

It doesn't do any harm though to tell your MP what you expect.

talexuser

It's got to be a possibility at some time in the future as more and more people end up with multiple 100ks under an ISA wrapper after saving max each year for 15 or 20 years.

Doesn't mean it will happen tomorrow, but almost certainly it will be capped eventually once it costs the government a significant amount in lost tax (the general population being a more quiescent target than large corporations).

thenudeone

Of course, it couldn't be a story dreamed up by the financial companies to encourage people to invest their money with them, could it;)

frugal90

this is a distinct possibility-

surely a cap would be a difficult thing as the value depends on the investment decisions made-likely that the limit would be placed on the amount allowed for investment if it were to happen

pjread

Arguably, a subscription limit in terms of cash-inwards could lead to ISA's being used for more speculative purposes? (e.g. taking a punt on very high-risk shares in an attempt to "charge" the ISA pot, before diversifying to more sensible securities or perhaps more likely just withdrawing and doing the same again until the cap is reached)

This would seem to run counter to the rationale for ISA's (long-term saving) and push it at least for a decent sized minority as more of a lottery-replacement...

chucknorris

frugal90 wrote: »

Has anybody heard the rumour that ISA's might be under threat?

next year they go up to £11760 but a few web articles make me quite worried?
http://www.mindfulmoney.co.uk/uncategorized/threat-of-lifetime-limit-on-isas-it-may-be-wise-to-use-your-maximum-isa-allowance-while-you-can/

Potential bad news obviously, but as I can't control it I am not going to worry about it.

System

As talexuser says, it's inevitable one day.

If ISA's offer a better deal than non-ISAs, then gradually savings will switch to ISAs. That was obviously what governments wanted. But not the point that they lose tax revenue.

Similarly they want people to give up smoking. But not everyone, because they also want the tax revenue.

srcandas

talexuser wrote: »

It's got to be a possibility at some time in the future as more and more people end up with multiple 100ks under an ISA wrapper after saving max each year for 15 or 20 years.

I think that is the problem. They have not served the poorer people well while those who can find £10k for 10 years or more do rather better.

Although I am happily financially ok and can use them and greatly appreciate the administration they (the S&S in particular) save me I'd like to see them scrapped.

They benefit the few and are now manipulated by the industry. I'd like to see more flexibility with pensions and people encouraged to save by education and not artificial bribery. And less manipulation by the industry (e.g. my bank not telling me how good it would be to move my money from a 4% account to a 1.6% account. Tax or no tax that is insanity:)).

Just my thoughts of course

rpc

frugal90 wrote: »

this is a distinct possibility-

surely a cap would be a difficult thing as the value depends on the investment decisions made-likely that the limit would be placed on the amount allowed for investment if it were to happen

Presumably, if such a cap were in place then the limit would either be no more contributions beyond a certain level or loss of tax relief above a certain level. Pensions already adopt a similar approach.

srcandas wrote: »

I think that is the problem. They have not served the poorer people well while those who can find £10k for 10 years or more do rather better.

So don't punish middle-class savers, but put something extra in to give an incentive to those on lower incomes. Exclusion of ISAs (or a certain value of ISAs) from means testing perhaps?