City firms urge Reeves to scale back cash ISA’s

DasTechniker

Today’s FT: City firms have been lobbying the chancellor to scale back the benefits of cash isa’s to force investors to into more stock market funds. Reeves is said to have not dismissed the idea.

badmemory

Surely stock market & ISAs have completely different purposes.  The stock market needs to be a much longer term commitment, whereas even a fixed term ISA needs only be for a year.  I certainly could not commit to a minimum of 5 years & even more could not take the risk with my savings.

masonic

Discussed here: https://forums.moneysavingexpert.com/discussion/6584823/financial-times-isa-article

subjecttocontract

badmemory said:

Surely stock market & ISAs have completely different purposes.  The stock market needs to be a much longer term commitment, whereas even a fixed term ISA needs only be for a year.  I certainly could not commit to a minimum of 5 years & even more could not take the risk with my savings.

Good point.
It's ridiculous to think of a cash ISA in the same way as a stocks & shares ISA. The elderly won't want the risk of investing in a stocks & shares ISA.

Robin9

Is the value of shares held in ISA significant cf to Pension Funds ?

happybagger

subjecttocontract said:

badmemory said:

Surely stock market & ISAs have completely different purposes.  The stock market needs to be a much longer term commitment, whereas even a fixed term ISA needs only be for a year.  I certainly could not commit to a minimum of 5 years & even more could not take the risk with my savings.

Good point.
It's ridiculous to think of a cash ISA in the same way as a stocks & shares ISA. The elderly won't want the risk of investing in a stocks & shares ISA.

Exactly. Non story. It would be seen to be giving tax breaks to rich people invested in the stock market but not interested in those that want safe cash savings. I know she's been "looking for ideas" on how to do her job so I guess this is why we have the story.

boingy

The story should say "People with an axe to grind, grind their axe".

Martin_L_is_my_guru

Playing devils advocate, a lot of people in the U.K. miss out on serious upside because they just hold cash, even avoiding the relatively risk averse FTSE100. To save doing the maths I will quote from MoneyWeek: 

..” Over 20 years, the average cash ISA returned 53.4% to savers, while an investor in the average global equity fund would be sitting on a massive 395.8% return.Someone holding a typical UK equity fund would have a 257% return.”

But yes, the way to address this is better financial education and access to financial advice. Rules on financial promotions for lower risk products could also be reviewed. Instead of forcing people away from cash!

badmemory

It is however extremely unlikely that I will live another 20 years until I am 98.  It is also quite likely that I will need access to those funds before I do pop my clogs.

Altior

Yep, interesting that there aren't categories for inflation protection, or in fact capital appreciation.

I am in cash currently for both reasons. Say for example the 10% regular saver from Virgin, I used simply to make a profit. 

I did find this site just now when doing a bit of research. The themes noted for 2030 are all arguably valid. Though not a lot around investing fundamentals, or the impact of compounding. I'd like to think I was reasonably savvy when it comes to the world of finance, but it's the first time these strategies/plans have 'crossed my desk'.

UK Strategy for Financial Wellbeing | Money and Pensions Service

Delivery plan for England | Money and Pensions Service

masonic

Kim_13 said:

Altior said:

At least Rachel from accounts, and her advisers will have access to this data.

So only 26% (retirement) + a proportion of most of the other categories shouldn’t be in cash (e.g. keep 6 months expenses on hand + funds to repair/replace a car with a runabout if a car is essential + a reasonable amount to replace white goods.)

A planned purchase is unlikely to be far enough away that the risk of making a loss on the market is minimal.

I imagine if you layer on the actual amount of net savings people have (after subtracting credit card debt etc), the amounts may well not exceed 3 months expenses in most cases.