The 85k guarantee-enough to protect ISA accumulation?

soros

If money is deposited in a bank or building society, and the provider goes down the pan, up to (a maximum) 85K is protected. So far so go.

With the nature of how ISAs function-a previous year`s subscription can be added to the new ISA each year (every year). With the cash ISA limit now at 15k and rising, it would not take long for the amount held with one provider to exceed the 85k protection limit.

Now some on here will be thinking, just split the investment between different providers. All well & good.

From a building society`s perspective, a society may be offering a very good ISA rate (flying pigs) but who is gonna whap all their wad in the same place if it exceeds the 85k?

Question: Does the gov need to get up to speed with legislation for ISAS in respect of the protection limit?:money:

Alter_ego

Yes they do need to up the protection, but it's OK with me if they wait 2 more years.

Archi_Bald

If anybody maxed their TESSAs and cash ISA allowances throughout the years, they could easily already have more than £85K (but less than £100K) in cash ISAs. Those that maxed their PEP and S&S ISA allowances are all likely to have considerably more. High 6-figure amounts are not uncommon, and there have been ISA millionaires since 2003.

Keeping huge sums in cash ISAs is almost certainly not the optimal long term strategy as equities have historically consistently outperformed cash.

I doubt we will be seeing any increase of the £85K FSCS limit any time soon.

It is worth remembering that basically the only reason we have an £85K limit for cash was a European Union directive (94/19/E, 2010), which brought the UK in line with the rest of the EU. If the UK left the EU, my guess would be that the limit would be even more unlikely to rise in the next 10-20 years than it is anyway.

masonic

I don't see much justification for having total cash ISA funds in excess of £85k. As Archi points out, the long term stuff would be better off in risk-based investments and money held short term (such as proceeds from the sale of a house) could not all be put in a cash ISA anyway.

mike88

Anyone who keeps in excess of £85k in a cash ISA needs financial advice.

jimjames

mike88 wrote: »

Anyone who keeps in excess of £85k in a cash ISA needs financial advice.

Absolutely.

I'd also question how many this affects, very few I'd imagine.

Archi_Bald

jimjames wrote: »

I'd also question how many this affects, very few I'd imagine.

Fully agree. I was meant to mention this too but forgot

dunstonh

Question: Does the gov need to get up to speed with legislation for ISAS in respect of the protection limit?

And who is going to pay for that?
And how to you get Europe to agree to it?

soros

mike88 wrote: »

Anyone who keeps in excess of £85k in a cash ISA needs financial advice.

I`m not a big fan of ISA`s generally.

If 85k in an ISA can be considered a poor way to invest, then so can putting just 2k in an ISA. It`s all about the rate of ruturn on the amount invested.

Keep 85k in an ISA today and the return is insulting. Keep 2k in an ISA and return is still insulating. Both are rubbish investments at the moment

If anyone has got some money in an ISA and says it is bad to hold 85k in an ISA it is hypocritical.

A point being over-looked here is this: What if 85k is held in an ISA and that 85k is only 2% of a person`s total wealth?:j

badger09

soros wrote: »

A point being over-looked here is this: What if 85k is held in an ISA and that 85k is only 2% of a person`s total wealth?:j

Then they probably wouldn't lose too much sleep over the prospect of losing a few £k.

Alternatively, they could be sensible and split their £100k (or whatever) between 2 cash ISA managers

MARTYM8`

I hate to say it - bar small building societies and credit unions where the FSCS protection is clearly useful - if the banking system goes down the whole thing will go down next time not just 1 bank. In that scenario the FSCS system would go bust - so the government would step in presumably to protect all deposits (or use a bail in).

So while I keep below £85k per banking group - I am a bit dubious about the ultimate value of this for big banks/societies.