Finally... ISA increase... sort of

friolento

boingy said:

friolento said:

Hoenir said:

When was the ISA limit fixed at £20k ?  About time it was raised. 

The vast majority of people can't even dream of putting £20k aside each year, let alone needing a £20k+ tax-free savings vehicle.

It's true that most people can't do that every year but there are plenty of ordinary folks who might find themselves with that sort of sum a few times in their life. Maybe a redundancy, an inheritance, a divorce settlement or a pension lump sum. With current interest rates the tax free thing is more important than it was a couple of years ago. 

Well of course there are people who can stick more than £20k into an ISA each year. I am one of them. It still remains true that the vast majority of people couldn't do it. I am of the school that tax benefits should be in the first instance to the broad masses of people, not to the few who have plenty already. I won't apologise for holding that view, even if it upsets the odd MSE forumite and friends of Kwasi and Liz.

GeoffTF

Alexland said:

GeoffTF said:

Vanguard has made it clear on more than one occasion that the UK bias is there to boost sales. 

That may have been their intent but I haven't seen anything to suggest it did actually drive sales. Many of them seem to think they were buying a passive tracker fund!

Vanguard has said that they have conducted customer surveys in which investors in all countries favoured a home bias. VLS has certainly been a marketing success. Vanguard has recently introduced similar products without a home bias in the UK for sale through advisers. VLS investors bought a basket of trackers with allocations that remained fixed over long periods of time. Vanguard has always published the composition of the funds, but many VLS buyers will not be interested in the details. The UK portfolios have been more complicated than the US ones. I expect that is marketing driven too.

Hoenir

Alexland said:

GeoffTF said:

Vanguard has made it clear on more than one occasion that the UK bias is there to boost sales. 

That may have been their intent but I haven't seen anything to suggest it did actually drive sales. Many of them seem to think they were buying a passive tracker fund!

Vanguard only launched in the UK in 2010. Global equity trackers weren't the rage back then. Was still the 60/40 era.  "Lars Kroijer" was the fad for a while. 

jbrassy

I can't help but think this is all a bit of a gimmick. First of all, the supposed purpose of the policy is to drive investment into UK equities. However, as the FT Alphaville article states, very few people are able to put away £25k a year anyway. Even taking into account those that can, the additional amounts invested will barely make an impact.

All this incentivises people to do is invest the regular £20k ISA allowance into ROTW equities and the £5k allowance into UK equities, so I'm not sure how much additional investment this will drive. Also, I'm not sure if this creates the right incentives for investors as it's nudging people towards home bias (into the poorly performing UK market). This also completely ignores the fact that a lot of UK-listed companies are not British, and equally a lot of UK companies are listed in other countries. 

If the Government is concerned about the poor performance of UK equities compared to the ROTW and the declining value of the UK equities market compared to the ROTW, they should be considering more ways to boost economic growth. Everyone knows productivity growth has been the major driver of the UK's poor economic performance since the financial crisis. What they need to do is find ways to boost the supply side of the economy, e.g. investing in infrastructure and education and doing more to incentivise businesses to invest (e.g. improving trading relationship with the EU). 

The 'UK ISA' is designed to appeal to wealthy flag-wavers and get a few good headlines on GB News / Daily Express etc and isn't really based on any sound economics.

[Deleted User]

I am only invested in the global fund but the extra £5k is good.

UK and Tax 5&6.

JakeHyde

older_and_no_wiser said:

Well we are now allowed to contribute an extra £5000 a year into an ISA.... as long as it's into UK funds/companies. I wonder how they'll police that and how investment platforms will market it.

Will it be worth a punt for those who have hit the £20k limit elsewhere? The higher returns of non UK funds (even after tax) will outweigh the tax savings of a UK fund. Who knows if this will remain the case in future though. 

Hmmm food for thought,

All I know is the FTSE100 just never seems to grow. If UK companies were so worth investing in, surely they would have already been worth investing in without this little stunt. 

If I'm right in thinking, if the eligible companies could only profit from money within the UK, and not do business outside of the UK, it means the room for growth is incredibly limited. It feels a little manipulative to try and get us to invest in the UK like this.

But hey, it's another opportunity to gain interest without being tax to absolute death like usual.  It would be nice if they gave us back some Capital Gains Allowance too, while they're at it.

But your idea of investing outside the UK and taking the hit on tax, could be an intriguing alternative.

barnstar2077 said:

As long as they don't phase out normal ISAs!

How very dare you! Don't even think it! 😮🙈

JakeHyde

mebu60 said:

I'd be interested to know what proportion of the MPs' pension fund is invested in 'the UK' (when they have defined what exactly that covers). 

Probably nowt! 🤣

JakeHyde

boingy said:

friolento said:

Hoenir said:

When was the ISA limit fixed at £20k ?  About time it was raised. 

The vast majority of people can't even dream of putting £20k aside each year, let alone needing a £20k+ tax-free savings vehicle.

It's true that most people can't do that every year but there are plenty of ordinary folks who might find themselves with that sort of sum a few times in their life. Maybe a redundancy, an inheritance, a divorce settlement or a pension lump sum. With current interest rates the tax free thing is more important than it was a couple of years ago. 

Me right now.  Inheritance from my dear mum. 

JakeHyde

Kaizen917 said:

Im quite disappointed to hear this UK ISA being announced while at the same time keeping quiet about the LISA. Its almost like the government is just trying to roll us from one half-baked thing to another.

Keep quiet about what part?  That it exists, or that it's failing or something? 

Alexland

JakeHyde said:

If I'm right in thinking, if the eligible companies could only profit from money within the UK, and not do business outside of the UK, it means the room for growth is incredibly limited. It feels a little manipulative to try and get us to invest in the UK like this.

It's not even likely that by buying qualifying shares/funds in a UK ISA that the companies themselves will get much benefit as in most cases you will just be buying existing shares that are already in circulation.
VCTs are far more effective at getting investment into the right types of UK growth companies as the tax relief is only available on newly issued shares. They should have just made VCTs more attractive by capping ongoing fees and/or slightly increasing the tax relief as 30% is not that attractive given the 2%+ ongoing fees and likely 10% discount to NAV on disposal. Still I guess the tax free divis that VCTs offer is useful to someone that has maxed their pension and ISA allowances.