Hunt to Overhaul ISAs this autumn

Altior

sevenhills said:

Altior said:

Investing is gambling. Yes we're playing the odds, based over many years of history that tell us over the medium to long term, the drift is always up and beats inflation. However, that is not absolutely guaranteed. Many, many people don't have the capacity to handle losses of any description, let alone a material drop, so investing is not really for them.

But people ignore that the last couple of years the value of their capital could be down over 10% if it's in savings accounts.
I would prefer to have the possibility of an increase than the certainty of a decrease.

Sure, and the percentage of the UK adult population that understand the true time value of money I would put at sub 20. The argument to them that you're taking this hit now, as it's less of a gamble than keeping cash assets in bank account just wouldn't wash with them. 

'We' implemented legislation, theoretically to help those people who were incapable of simply searching for low cost domestic energy contracts, and that meddling from the centre has now landed us with the industry effectively price fixing for everyone. 

zagfles

Altior said:

Investing is gambling. Yes we're playing the odds, based over many years of history that tell us over the medium to long term, the drift is always up and beats inflation. However, that is not absolutely guaranteed. Many, many people don't have the capacity to handle losses of any description, let alone a material drop, so investing is not really for them.

It should not be government's place to nudge us into doing anything financial that involves individual personal risk. Create the platform, create the right incentives but don't meddle, don't actively manipulate. We only have to look over the last year or so and the widespread blubbing over mortgage interest rates normalising. So government does something to nudge financial incompetents into putting money into a S&S ISA, the following year the market corrects by 30%, the 'internet' would be demanding yet another taxpayer bailout (I would include within meddling, the encouragement of investment into a chosen area/form/type of equities over another). 

It's more than a nudge, for instance pressure is put on pension providers to incorporate "ESG" factors into their funds, especially default workplace pension funds which something like 96% of people use as they don't understand investing well enough to make an active decision.

Basically trying to use peoples' pensions to achieve political and social objectives. Fine if individuals make a conscious choice to eg avoid oil, tobacco, alcohol etc, but to impose moral/political/social objectives on peoples' investment by default is simply imposing their subjective morality on others who may have a different outlook on life.

They justify it by using language like "ESG risk" which tries to imply companies with bad ESG credentials (however they define that) are more likely to do badly - as if an objective analysis of their prospects isn't already incorporated in the market price!

https://www.theactuary.com/news/2022/07/19/spike-pension-schemes-incorporating-esg-factors-default-funds

https://www.fca.org.uk/publications/policy-statements/ps-21-24-climate-related-disclosures-asset-managers-life-insurers-regulated-pensions

https://forums.moneysavingexpert.com/discussion/6461788/proposed-pension-changes-by-jeremy-hunt-to-invest-in-uk-start-ups/p1

Ocelot

Linton said:

4) As a matter of public policy I think the £20K annual allowance is far too high - it makes S&S ISAs more of a generous tax avoidance option for the moderately wealthy than an encouragement for the average working person to invest more of their money.  Having extra allowance for buying "UK" company shares seems to be doing the wrong thing for the wrong reason.

It may be high enough for saving that much to put in an ISA every year, but I put 20k a year from existing, taxable, accounts into ISAs. In that respect it is not too high.

wmb194

I wonder what the mechanism for this 'boost' would be? Buy £20k of shares in LSE listed companies and then have your annual allowance boosted by, say, 10%? What if I then sold these shares? Do I keep the increased allowance or do I lose it? Do I have to hold them for a minimum period? It could get complicated.

In the past the Treasury would have introduced a new version of an Isa but it wants to avoid this now...

TheAble

wmb194 said:

I wonder what the mechanism for this 'boost' would be? Buy £20k of shares in LSE listed companies and then have your annual allowance boosted by, say, 10%? What if I then sold these shares? Do I keep the increased allowance or do I lose it? Do I have to hold them for a minimum period? It could get complicated.

In the past the Treasury would have introduced a new version of an Isa but it wants to avoid this now...

I thought it would be along the lines of £20,000 + £X of which the £X could only be invested in UK stocks (but you can still do with the £20k whatever you want).

Agree the question of what happens if you subsequently sell the UK stuff is a tricky one. Maybe the X facility simply gets reserved to allow UK investments only - whether you sell them or not in the meantime doesn't matter.

Audaxer

Albermarle said:

One radical option being considered is an additional Isa allowance for investing in UK companies, according to these people, although this work is said to be at a preliminary stage

Defining what a UK company is could be quite tricky.

For example they could be listed in London, but have a majority of foreign ownership.

They could be listed in London, but 100% of their main activity could be overseas.

They could have a substantial activity in UK with thousands of employees, but have their HQ in another country for tax reasons ,

Etc Etc

As Investment Trusts are classed as shares, I'm wondering if they would be included. For example, F&C and Scottish Mortgage ITs are both in the FTSE 100, and consist mostly foreign equity.

wmb194

Audaxer said:

Albermarle said:

One radical option being considered is an additional Isa allowance for investing in UK companies, according to these people, although this work is said to be at a preliminary stage

Defining what a UK company is could be quite tricky.

For example they could be listed in London, but have a majority of foreign ownership.

They could be listed in London, but 100% of their main activity could be overseas.

They could have a substantial activity in UK with thousands of employees, but have their HQ in another country for tax reasons ,

Etc Etc

As Investment Trusts are classed as shares, I'm wondering if they would be included. For example, F&C and Scottish Mortgage ITs are both in the FTSE 100, and consist mostly foreign equity.

Many* are English and Scottish PLCs so for me there should be no question. The FTSE 250 is replete with them and many only invest abroad e.g., Japan, Vietnam, continental Europe, the US.

*Whilst others are domiciled in Jersey or Guernsey it sounds like the idea behind this scheme is London listed, rather than a strict "UK" restriction.

greatkingrat

TheAble said:

I thought it would be along the lines of £20,000 + £X of which the £X could only be invested in UK stocks (but you can still do with the £20k whatever you want).

Agree the question of what happens if you subsequently sell the UK stuff is a tricky one. Maybe the X facility simply gets reserved to allow UK investments only - whether you sell them or not in the meantime doesn't matter.

So I could just invest the extra £2k or whatever in a UK tracker fund, then move my normal £20k from a global tracker to a global (exc UK) tracker in order to keep the balance the same!

parchedpeas

If they wanted to change one thing it would be to make the LISA a S+S only option and double the amount allowed (£8000 + £2000 bonus). They could fold these in with the Help To Save scheme, so people on low pay get their contributions matched up to £600 a year. They could remove the cap on first time buyers house prices with them too. They could allow these to operate up to the State Pension age (or up until your first withdrawal so you can keep contributing past 50 for the extra £2000). They could also remove the bonus penalty which is a 6.25% hit on any emergency withdrawals.

People could use them as a lifetime savings fund / house buying fund / mortgage offset / pension 'interim'.

It would be a real 'Lifetime' ISA.

So, of course, they won't do any of that.

eskbanker

parchedpeas said:

If they wanted to change one thing it would be to make the LISA a S+S only option and double the amount allowed (£8000 + £2000 bonus). They could fold these in with the Help To Save scheme, so people on low pay get their contributions matched up to £600 a year. They could remove the cap on first time buyers house prices with them too. They could allow these to operate up to the State Pension age (or up until your first withdrawal so you can keep contributing past 50 for the extra £2000). They could also remove the bonus penalty which is a 6.25% hit on any emergency withdrawals.

People could use them as a lifetime savings fund / house buying fund / mortgage offset / pension 'interim'.

It would be a real 'Lifetime' ISA.

So, of course, they won't do any of that.

Seems to me that abandoning LISA altogether would be a more likely prospect than enhancing it by removing or relaxing all of its constraints!