Finally... ISA increase... sort of

InvesterJones

JakeHyde said:

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.

Make sure to look at total return when looking at growth - FTSE 100 companies are often dividend payers rather than promise of future returns (ie growth).

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.

.

One person's manipulation is another persons incentive But I agree with your sentiment - it's a fine line between say regulation/countering market distortions and protectionism. I'm sure it's easy for us to say 'fix the root cause of companies not wanting to list on the FTSE100' (if that's what the aim is) but perhaps that's simply too hard while the political gain for a slightly more sticking plaster solution makes it worthwhile enough.

DannyCarey

What would you even buy in this British ISA? Singe stocks? nope... the FTSE 100? God no. 

InvesterJones

DannyCarey said:

What would you even buy in this British ISA? Singe stocks? nope... the FTSE 100? God no. 

That's partly what the consultation will answer (or at least, what you can buy). If you believe in efficient markets then FTSE 100 companies should already be priced correctly for their expected future returns, so as ever it's a case of asking whether you think you know better than the wider market.

wmb194

DannyCarey said:

What would you even buy in this British ISA? Singe stocks? nope... the FTSE 100? God no. 

If it has to be London listed equities then Investment Trusts. If OEICs are allowed then you can choose from one of those. An idea in the consultation document seems to be that a fund might need to be comprised of at least 75% UK companies.

intalex

Sounds to me like the BISA's main purpose might be to simply try and make the LSE more attractive for listings?

Alexland

intalex said:

Sounds to me like the BISA's main purpose might be to simply try and make the LSE more attractive for listings?

The main purpose of the UK ISA is to give something to announce that sounds generous on ISA allowances and appeals to the right wing of the conservative party in the knowledge it might never be implemented anyway. Like the (so far) unremarkable British Savings Bonds it's a useful distraction to divert attention away from the real issue of years of negligible economic growth per capita.

Hoenir

intalex said:

Sounds to me like the BISA's main purpose might be to simply try and make the LSE more attractive for listings?

Companies list on markets so that as the need arises they can raise equity capital to grow. If there's no demand for equity then it's a fruitless exercise.  Retaining a listing is extremely expensive not a decision taken likely. 

eskbanker

JakeHyde said:

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? 

I believe that comment related to a hope, or even expectation, that the chancellor would pay attention to Martin Lewis's lobbying to relax the LISA rules in this budget, but nothing came of it:

https://forums.moneysavingexpert.com/discussion/6507861/mse-news-martin-lewis-is-a-lifetime-isa-win-coming-in-the-budget

Alexland

eskbanker said:
I believe that comment related to a hope, or even expectation, that the chancellor would pay attention to Martin Lewis's lobbying to relax the LISA rules in this budget, but nothing came of it:

Yes it's just not fair to (usually young inexperienced) first time buyers to expect them to even fully understand they are taking a punt on the future purchase price of their property considering the unknown house price inflation that will happen during their savings journey with a risk that they end up worse off using a LISA then if they had just used a savings account. I generally like LISAs (and have been contributing the full allowance to mine each year since launch for age 60) but this obvious product defect should have been fixed by at least reducing the penalty to 20% in such circumstances to only reverse the bonus or preferably increasing the property price cap with house price inflation.

Ocelot

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.

True, but many of us put expiring, taxable, fixed rate bonds into them every year so we don't have to pay as much tax.