Financial Times ISA article

Beeblebr0x

Financial Times reports Phoenix and the LSE have urged the Chancellor to scale back tax breaks for cash ISAs. 

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Eyeful

More companies in the city, thinking of how they can generate larger pay packets and bonuses for themselves.
They really do not care about anyone else.

Beeblebr0x

Eyeful said:

More companies in the city, thinking of how they can generate larger pay packets and bonuses for themselves.
They really do not care about anyone else.

They conveniently omit to mention the value of S&S ISAs can go down. If it were to happen, we would max out on Premium Bonds.

Rusty190

What do financial institutions do with all the money that is invested in fixed rate cash ISA's? 
I always thought they used it to generate more income in some way. 

AstonSmith

Every time I've looked at stocks/shares I've been put off by the huge fees and the risk involved. No-one wants to get back less than they put in.

eskbanker

AstonSmith said:

Every time I've looked at stocks/shares I've been put off by the huge fees and the risk involved. No-one wants to get back less than they put in.

That's a very simplistic way of looking at it - most investors will do so for the long term and won't get back less than they put in, or pay huge fees for that matter.  If you have a pension, what do you think is happening with that money?

Alexland

AstonSmith said:

Every time I've looked at stocks/shares I've been put off by the huge fees and the risk involved. No-one wants to get back less than they put in.

Diversification, asset allocation and time invested can substantially reduce risk and fees can be ultra low if you shop around.

Together these can make it highly likely you would get back much more than you put in.

Grumpy_chap

That article linked by the OP seems very one-sided.  Representatives from "the City" think it would be better if the whole sum held within cash ISA's is invested in "the City" equities.  No counter view seems to be referenced.

There may be large sums held in ISA's in aggregate, but there are probably a large number of individuals with fairly moderate sums held in cash ISA's.  We have to assume that at least some - probably a reasonable proportion - of those with maxed out ISA's over several years have that cash deposit as part of a balanced larger portfolio.

There are also macro-economic considerations that the Chancellor will - should - consider around encouraging those with little savings to save is preferential to individuals having no savings as it builds resilience into the system and avoids the benefits system being the first responder to financial distress events.  There are societal benefits in individuals having sufficient reserves to ride the bumpy path.

masonic

Capping the overall benefits of ISAs was one of the many things on the table for the last budget, but it wasn't taken forward for whatever reason. I doubt it has legs now. One has to wonder what the representatives from the City are really thinking. Surely they cannot believe that any such change would make a material difference to the UK market. Perhaps they could innovate and come up with some sort of product that would tempt cautious savers to deploy their capital differently, rather than trying to pull the rug out from under them.

Aretnap

AstonSmith said:

Every time I've looked at stocks/shares I've been put off by the huge fees...

The fees on savings accounts are greater than on investment accounts. I mean, you don't think bankers work for free, do you?

They just don't tell you what the fees are. They lend your money out at maybe 7% interest, pay you 4% interest, and quietly trouser the extra 3% that your money is earning.

Whereas with an investment account they are required to be upfront about the fact that they are taking 0.5% of your money in fees, leading people to be outraged about the enormous amounts of money that they are taking from hardworking savers (TM).

Qyburn

When first introduced you could put more each year into a stock and shares ISA than you could into a cash ISA.