Will MSE lobby the government to raise either PSA or ISA allowance?

pecunianonolet

Inflation is still rising and the BOE is inreasing interest rates sharply and predictions show further rises are inevitable. Banks only pass on interest rates slowly and many new saving products are withdrawn from the market, sometimes after days. However, mortgage rates increase quickly, sometimes the next day after a BOE announcement.

This means that with £16,700 in savings in a 3% easy acccess account you generate £501 interest over 12 months (higher rate). With £33,350 at 3% easy access over 12 months you gain £1000.50 in interest (lower rate). In real terms, assuming constant inflation rate of 11.1% this means £16,700 will have a buying power of only £15,347.30 in 12 months and £33,350 turn into £30,648.65

With fixes of between 4-5% the cash needed to break PSA is much lower.

With 11.1% inflation in October this would be a loss of 8.1% through inflation.

Many people have been responsible and put money aside during lockdowns and are now screwed as lending criteria has been tightened, house prices remain inflated and mortgage rates have increased. Cash is eaten away by inflation. 

Millions of people will face tax payments and ISA's only provide some sort of relief but come at the price of even less competitive interest rates. 

I am aware that for many people this might seem like a nice problem to have but for many this is a serious problem. 

Imvrasos

Fiscal drag is the new hero of the state behemoth and the tax loving brigade these days, therefore I would just be content to see the existing allowances remain and not being reduced.

dunstonh

Will MSE lobby the government to raise either PSA or ISA allowance?

Have you not been following the news over the last month?

Why should the Government be taxing everyone to hell but at the same time increasing the PSA or ISA allowances?

I am aware that for many people this might seem like a nice problem to have but for many this is a serious problem. 

It is not a serious problem at all.

You are advocating giving those with lots of capital put aside tax reliefs whilst the rest of the country gets screwed.   Things are going to be bad enough as it is without gifting cash rich savers an extra perk that frankly isnt called for.

Albermarle

The current tax free allowances are actually pretty generous by international standards. A saver in France, Ireland, Germany etc would love to be able to shelter £20k pa from tax !

Both the £20K and the £1K PSA, almost exclusively benefit the Top 20% and are of zero benefit to more than 50% of the population. So no chance they will get increased, just be glad they exist at all.

intalex

Albermarle said:

The current tax free allowances are actually pretty generous by international standards. A saver in France, Ireland, Germany etc would love to be able to shelter £20k pa from tax !

Both the £20K and the £1K PSA, almost exclusively benefit the Top 20% and are of zero benefit to more than 50% of the population. So no chance they will get increased, just be glad they exist at all.

Sorry if it's a silly question, but how is it 20k?

pecunianonolet

dunstonh said:

Will MSE lobby the government to raise either PSA or ISA allowance?

Have you not been following the news over the last month?

Why should the Government be taxing everyone to hell but at the same time increasing the PSA or ISA allowances?

I am aware that for many people this might seem like a nice problem to have but for many this is a serious problem. 

It is not a serious problem at all.

You are advocating giving those with lots of capital put aside tax reliefs whilst the rest of the country gets screwed.   Things are going to be bad enough as it is without gifting cash rich savers an extra perk that frankly isnt called for.

Yes, I follow the news, in different countries and in different languages. 

I am advocating that normal middle class earners have any incentive to put money aside instead of spending it, which in turn just pushes inflation. It didn't take long during Covid lockdowns to put enough aside to now get pushed into paying tax when you now fix at 4-5%.

I would not deem myself rich, also who defines this and at what level? I was saving during Covid to buy property (first time buyer), however, prices went up sharply because the government lowered stamp duty and put measures in place e.g. 5% mortgages to send the property market into hell. So I was barely able to but not willing to buy a medium quality property for a totally inflated price 20%-30% above home report. Now, prices start to go down but mortgage rates are up and will keep riseing so instead of making the banks fat I would prefer to save and bring my LTV down. So basially screwed!

Albermarle said:

The current tax free allowances are actually pretty generous by international standards. A saver in France, Ireland, Germany etc would love to be able to shelter £20k pa from tax !

Both the £20K and the £1K PSA, almost exclusively benefit the Top 20% and are of zero benefit to more than 50% of the population. So no chance they will get increased, just be glad they exist at all.

True, generous but not great. E.g. Germany has 801€ for singles and 1602€ for married couples. Rising to 1000€ and 2000€ in 2023 and you can count losses in shares against it and everyone has it, regarless of how poor or rich you are. Tax system in Germany is much more complex than in the UK, Ireland is a tax haven for companies, France I am not sure but I know they retire early and have a lot of public holidays. 

If you claim that only the top 20% benefit from this, your opinion but I would disagree. It is for lower and middle class earners as highest earners do not have a PSA. If you say it is of no benefit to 50% of the population it would be enough testament of the devison of elite/rich and poor and no real middle class. 

That many people, especially pensioneers can't heat, people live in social housing full of mould where I would not even let animals in is a shame. that my partner is flying to other European countries to see a dentist because she is unable for over 1.5 years to register with one locally als speaks for itself. I would happily pay more national insurance but it has now been lowered again. 

Dazed_and_C0nfused

intalex said:

Albermarle said:

The current tax free allowances are actually pretty generous by international standards. A saver in France, Ireland, Germany etc would love to be able to shelter £20k pa from tax !

Both the £20K and the £1K PSA, almost exclusively benefit the Top 20% and are of zero benefit to more than 50% of the population. So no chance they will get increased, just be glad they exist at all.

Sorry if it's a silly question, but how is it 20k?

https://www.gov.uk/individual-savings-accounts/how-isas-work

Albermarle

If you claim that only the top 20% benefit from this, your opinion but I would disagree. It is for lower and middle class earners as highest earners do not have a PSA

It is only an estimate, and a memory from an article I once read.

You have to earn £150K not to have a PSA ( maybe £125K after this mini budget) I think this accounts for only a small % of people (2%?) Even then they can save £20K pa in an ISA

Someone on even 50% above the average salary ( £35 K to £45K depending on how you measure it) is not realistically going to care whether the ISA annual limit is £10K or £20k as they would never be able to save that much. Maybe they could be affected by the PSA being frozen if they were particularly good long term savers.

So really only people say earning double or probably triple the average salary, or have income from other sources, can take the full advantage of an ISA (and 40% tax relief on pension contributions) 

dunstonh

I am advocating that normal middle class earners have any incentive to put money aside instead of spending it, which in turn just pushes inflation. It didn't take long during Covid lockdowns to put enough aside to now get pushed into paying tax when you now fix at 4-5%.

The incentives are the pension wrapper and the ISA wrapper.

£20k a  year ISA allowance, not dependent on income along with £3600 pension allowance, not dependent on income (higher if you earn more) allow you to build tax efficient pots of very large amounts within a relatively short period.

pecunianonolet

Would you say 50k is an above average salary, according to the figures above it would be so. Is it not that the average is too low because too many people not earn enough to actually live of the work they do.  

The ISA allowance is unique indeed but it would be great if the interest they pay would be at least comparable to easy access. 

Maybe I invest more in Scotch, at least I get 40% +

eskbanker

pecunianonolet said:

Would you say 50k is an above average salary

Absolutely!  There are all sorts of different ways of measuring it, but all of them result in averages significantly below £50K....