Proposed £100k ISA lifetime limit

mebu60

Isa allowance: Hunt urged to introduce £100,000 cap in next Budget | This is Money 

Obviously won't 'save' the government anything. Potentially place more savings into taxable status, especially as the CGT allowance plummets. At the risk of causing more savers to give up saving as they are hammered from every direction. 

Band7

Link to the Resolution Foundation report: https://www.resolutionfoundation.org/publications/isa-isa-baby/

eskbanker

Thread title is unnecessarily clickbaity IMHO - as far as I can see there's no suggestion that the government is taking any notice of a report from a think-tank, so 'proposed' doesn't actually signify any likelihood of this independent suggestion being implemented as such....

masonic

In practice this would be a complete nightmare to implement. ISA allowance is effectively dependent on the total you have saved and invested across the ISAs you hold, which for many people will fluctuate from one day to the next. HMRC isn't going to be able to collate data until well into the following tax year in order to notify people they no longer have an ISA allowance for that year. At least the report rightly highlights that any action taken would disproportionately affect older generations using them in retirement. Probably a suggestion to put in the same category as means-testing the state pension.

bd10

Agree with the clickbaity nature title. However, either leaving the 20k limit constant for another few years or reducing the annual allowance rather than total account size would be a low hanging fruit. Having said that, the gov't knows that savings habits are a bit suboptimal, so I doubt they want to alienate their voter base.

hoc

Flawed research with gaping holes in financial and social logic. Molly Broome, the economist interviewed is a 20 something year old in the job for less than a year and clearly trying to establish herself on internet and social media, this should set the tone and weight of this think thank proposal.

ISA is not just for savings and there is nothing about the rules that make them "heavily skewed towards helping richer households". ISA isn't some exotic tax avoidance scheme accessible only to the rich. There isn't a minimum contribution limit that locks out "the poor." It's available to anyone, any amount can be contributed.

This proposal is laughable because it would be overly complex to manage and more importantly it would require a retrospective change to tax status. If you have a problem with ISA and want to make a case that could at least be taking seriously you should propose to have the annual limit reduced for future contributions. This has been happening through fiscal drag anyway, if the limit had been raised with inflation the 20k that was set in 2017 would be close to 30k by now.

Many contributing diligently well below the annual limit to S&S ISA for years will have accumulated over 100k. The article acknowledges not enough people save or invest and leads to the conclusion that a government programme that encourages saving or investing be scrapped! These are usually the same think thanks who identify there's a housing crisis and propose more government subsidy to help buyers.

cricidmuslibale

hoc said:

Flawed research with gaping holes in financial and social logic. Molly Broome, the economist interviewed is a 20 something year old in the job for less than a year and clearly trying to establish herself on internet and social media, this should set the tone and weight of this think thank proposal.

ISA is not just for savings and there is nothing about the rules that make them "heavily skewed towards helping richer households". ISA isn't some exotic tax avoidance scheme accessible only to the rich. There isn't a minimum contribution limit that locks out "the poor." It's available to anyone, any amount can be contributed.

This proposal is laughable because it would be overly complex to manage and more importantly it would require a retrospective change to tax status. If you have a problem with ISA and want to make a case that could at least be taking seriously you should propose to have the annual limit reduced for future contributions. This has been happening through fiscal drag anyway, if the limit had been raised with inflation the 20k that was set in 2017 would be close to 30k by now.

Many contributing diligently well below the annual limit to S&S ISA for years will have accumulated over 100k. The article acknowledges not enough people save or invest and leads to the conclusion that a government programme that encourages saving or investing be scrapped! These are usually the same think thanks who identify there's a housing crisis and propose more government subsidy to help buyers.

I couldn’t agree more with the whole of this post above! It’s an outstanding contribution imho!

bd10

btw, had a look into the historical ISA and also PEP allowance levels since inception. They were never cut in nominal terms.

https://www.fool.co.uk/investing-basics/isas-and-investment-funds/historic-annual-isa-allowances/ 

But worst case were kept unchanged for a prolonged period of time, so in real terms cut (just like income tax bands unchanged etc). I'd say, false alarm.

billy2shots

hoc said:

 If you have a problem with ISA and want to make a case that could at least be taking seriously you should propose to have the annual limit reduced for future contributions. 

Unfortunately if you keep an eye on social media across the platforms, there is a huge tide of resentment in younger generations toward the 
'lucky' older generations. 

MSE is on the whole a more mature platform but even here there is now regular division occuring. 

Log into platforms with a younger user base and the anger is palpable. 

Reducing future income would stoke that fire more. 'Oldies' had the chance to invest well, and now we are penalised etc. 

As an older millennial (1982) I don't seem to fall into either camp but cracks are widening and it's obvious to see. . Government as always are in an impossible position but "this time it's different ' to steal a well known investment quote. How do you even attempt to satisfy both sides whilst getting the countries finance back on track. 

jimjames

masonic said:

In practice this would be a complete nightmare to implement. ISA allowance is effectively dependent on the total you have saved and invested across the ISAs you hold, which for many people will fluctuate from one day to the next. 

I agree but it's something the government have in place for pensions with the lifetime allowance and the annual contribution limits so it is technically possible to put something in place. Not suggesting that it is a good idea at all but the limit of £20k per year does seem pretty generous in comparison to other countries.

Malthusian

billy2shots said:
Unfortunately if you keep an eye on social media across the platforms

You'll almost certainly encounter content that reflects neither majority opinion, nor the thinking of those in positions of power and influence, but whatever posts the algorithm picked out as the most tendentious and divisive and promoted to the top?
Something that will make your brain feel as if you are under attack, so that you can't close your browser because it feels like surrendering?

 there is a huge tide of resentment in younger generations toward the 'lucky' older generations.

Yep, thought so.
I need a pint of milk later, must remember to take my surfboard so I can ride over the tides of resentment out there.

Government as always are in an impossible position but "this time it's different ' to steal a well known investment quote. 

Um, the full quote is "the most dangerous words in finance are 'this time it's different'" and the point is that it is never different.