Do You Have The Resources To Invest 20,000 Per Year Into An ISA?

Kim_13

The only people who will be forced to put more into S&S will be those faced with a choice of pay more tax or take the risk - those who are close to a higher rate of tax so extra taxable income from savings would push them over. So it’s important that they get the cash limit right, given fiscal drag might now be about to affect people that it never ought to (e.g. those with Basic State Pension only, those on minimum wage.)

You might argue that people who are actually funding ISAs to the max every year can afford to take the risk, therefore if they want the extra tax wrapper, they need to do that. The average person cannot, so shouldn’t be forced into something that isn’t appropriate by the limit being too low. There are reasons that people would need to save more than the suggested £4,000 per year that government shouldn’t want to get in the way of (saving for a house, saving for a family.) If people are not able to save for those things, they will likely cost the state more.

People will join MSE either because they are interested in finance or need help with something (for some that will be clearing debt, so many probably aren’t coming into this part of the forum as why get depressed by how much others can afford to save while you are struggling.) After a period here, many will be better off for the healthier habits and tips they have gleaned from here, whatever their income level is. So I would say that a lower percentage of the population as a whole can afford to save £20K than can afford to do so here.

masonic

TheQuaker said:

mostilts said:

Relatively new here. I am trying to beat the Chancellor’s possible reduction in annual cash isa allowance soon, but don’t have £20K ready cash to use but will have in due course this year. But I already hold a substantial funds in a Flexible Cash ISA, so I will temporarily transfer £20K from my existing Flexible Cash ISA to my current account, then open a new Flexible Cash ISA to use this year’s full allowance before the Chancellor acts. As funds become available over the year I’ll replace the funds in my original Flexible Cash ISA.

Can you do this? I was under the impression once you've withdrawn money from a previous year's cash ISA, you couldn't then put money back in, as that year was in the past.

You can if that past ISA is flexible. It has to be done before the end of the tax year in which the flexible withdrawal was made.

What is being suggested is...

1) Flexibly withdraw £20k from prior tax year Flexible cash ISA A.

2) Make £20k new subscriptions to cash ISA B using this money.

3) Before the end of the tax year, make replacement subscriptions to Flexible cash ISA A using money that is not available right now.

TheQuaker

masonic said:

TheQuaker said:

mostilts said:

Relatively new here. I am trying to beat the Chancellor’s possible reduction in annual cash isa allowance soon, but don’t have £20K ready cash to use but will have in due course this year. But I already hold a substantial funds in a Flexible Cash ISA, so I will temporarily transfer £20K from my existing Flexible Cash ISA to my current account, then open a new Flexible Cash ISA to use this year’s full allowance before the Chancellor acts. As funds become available over the year I’ll replace the funds in my original Flexible Cash ISA.

Can you do this? I was under the impression once you've withdrawn money from a previous year's cash ISA, you couldn't then put money back in, as that year was in the past.

You can if that past ISA is flexible. It has to be done before the end of the tax year in which the flexible withdrawal was made.

What is being suggested is...

1) Flexibly withdraw £20k from prior tax year Flexible cash ISA A.

2) Make £20k new subscriptions to cash ISA B using this money.

3) Before the end of the tax year, make replacement subscriptions to Flexible cash ISA A using money that is not available right now.

Wow, those don't seem to be well advertised or explained. Thanks for confirming. If only I'd known about this sooner 😪

subjecttocontract

Flexible ISAs have variable interest rates and with rates already falling, & suggestions of 3 base rate drops this year the flexible option doesn't look particularly attractive to me.

slinger2

subjecttocontract said:

Flexible ISAs have variable interest rates and with rates already falling, & suggestions of 3 base rate drops this year the flexible option doesn't look particularly attractive to me.

The first statement is not true. Quite a few fixed-rate fixed-term ISAs are flexible. That aspect is often not so tempting since there will generally be a penalty for withdrawing before the end of the term. For instance on a 1-year fix the penalty will be about 1%. Paying that might still be worth it, depending on the individual circumstances, and knowing that the money can replaced later in the tax-year might still be useful.

See eg https://www.vanquissavings.co.uk/view-ISA-Accounts/

"All our Cash ISA products are flexible, so you can make withdrawals subject to the predetermined fixed term periods. If you make a withdrawal, including transferring your Cash ISA to another provider, without completing the relevant fixed term period, a deduction of interest will apply."

jimjames

Exodi said:

nubian said:
So it brings me to my original motivation for posting, if the chancellor want us the masses to be able to invest in the market and its potentially a great idea, she really should address our inability to afford to save/invest.

I read your whole response and to be honest, I feel I came across a bit strong in my original reply so I'd like to apologise. I understand the question, I just didn't understand the point of the poll, but it's not important.

jimexbox said:

I know loads of people on normal wages dropping 20k in a cash ISA regularly. Money from redundancy, inheritance and drip feeding 25% tax free pension are the main sources. 

My pension is currently in 100% equities, I don't want a ss ISA. 

The government must realise if they force people out of Cash ISA's who don't want to take risk, that the money will just end up in S&S's ISA's 'invested' in money market funds like this.

Except originally when the ISA rules only allowed £3k of the £7k allowance to be in cash the S&S component didn't allow cash type funds to be held in it. The changes that allowed the full allowance in cash or S&S changed that so could well change back again.

Flugelhorn

jimjames said:

Flugelhorn said:

I will  keep the bulk my money away from investments if at all possible - was hit by the endowment saga, fortunately was able to cover the gaps created by  the dismal returns etc but decided never to do similar again. 

Seems like cutting your nose off to spite your face. Current investment options are nothing like endowments.

fair enough - but there are some in this household who will never again trust financial institutions to get it right 

Flugelhorn

dunstonh said:

Flugelhorn said:

I will  keep the bulk my money away from investments if at all possible - was hit by the endowment saga, fortunately was able to cover the gaps created by  the dismal returns etc but decided never to do similar again. 

The issue with endowments was not dismal returns.   It was how they were set up and the lack of flexibility to adapt.

e.g.   Two endowments set up using the same investment fund.      The investment fund returned 6% p.a. on both of them as it was the same fund.   However, one endowment fell short.  They other paid a surplus.   Logically, the person paid the surplus would be happy and the one that was short would be unhappy.    The difference would be the target growth rate put in place at the start that decided the premium to be paid and how much would go to the investment element.     One could have a 3% target growth rate (so 6% return would pay surplus) and the other could have a 12% target growth rate and would result in a shortfall.

Once an endowment was set up it could not be adjusted.   It was a flaw in their product type.

Not investing because of misunderstanding the endowment issue has cost you money.  

maybe yes BUT it was quite a bite and we were all sold these things as being marvellous - which they weren't. the issue was that the "promise" that they would cover the mortgage and the rest just didn't happen. It was pre internet days - you only knew what you were told at the time.

Anyway no biggie - looks like chancellor will get it all in the end anyway 

ossie48

In answer to the original question yes we do have the resources. We currently have 60% of our savings in S&S ISA's and 40% cash. 

As we're retired 'the latest' is probably just a gentle reminder to keep the cash pot topped up rather than going full out on Investments. I guess we'll probably keep drip feeding the ISA's but not use up the full allowances as we did for the last financial year. 

Ocelot

Beddie said:

I don't have £20k of "new" money, but I have savings elsewhere that I am able to move into an ISA each tax year. It's not as straightforward as the poll implies. Other people might get an inheritance and want to move that into ISAs as much as possible.

Exactly. That's what I do. Every year I transfer some money from non-ISAs so the returns are tax free, but can't accumulate 20k of new money each year.