Martin Lewis: Is the £20,000 cash ISA limit about to be killed off?

ColdIron

Suzycoll said:

booneruk said:

Suzycoll said:

I have decided to start withdrawing half my savings from my  cash ISA & put it in a safe at my house ! Call me stupid but .... Thoughts ?

You'll be guaranteed to lose money effectively - inflation will erode the purchasing power of that safe-ensconced cash.

You'll also introduce the cash to theft/fire risk.

Yes I realise that . Sadly ( and I know it's stupid) I just don't trust any government with my cash 😔 

In what way do you perceive that your cash will be safer or better protected from the guv'mint in a box at home?

I do concede that access to some cash can be important as we saw in Spain (though it was not much use during COVID), but half your savings?

Hoenir

Neversurrender said:

I'm afraid this idea of being encouraged to invest in stocks and shares isa  instead of cash isa needs some serious looking at.

It's to stop people sheltering vast sums of money tax free. Few people have the resources to deposit £20k a year. 

Ordinary deposit / savings accounts will still be available. 

No need to stocks and shares. 

[Deleted User]

It seems an odd time to roll this video out.

I don't want to use the term scaremongering but .....

Ah may as well.

VNX

chubsta said:

Another point that keeps being mentioned is that it won’t affect money already in a cash isa - I wouldn’t trust this at all as the government can easily change the rules on anything they see fit so wouldn’t be surprised if they found some way around it. 

Governments of all types just seem to think our money is theirs and they can take it as they see fit.

In theory but it would be a logistical nightmare for them to backdate it

VNX

Bernythedolt said:

Currently one can transfer funds from a S&S ISA to a Cash ISA - I've done that a few times myself.  Assuming that facility will remain:-  

If the Treasury introduces this annual £4k (let's say) cap on Cash ISA deposits and leaves (say) £16k potential for an S&S ISA, to encourage S&S investing, then careful planning could presumably work around this to still get the full £20k per annum into a Cash ISA from year two onwards...

Tax year 1:  Put £4k into a Cash ISA and £16k into S&S ISA. 
Tax year 2:  Put £4k into a Cash ISA, £16k into S&S ISA.... and transfer last tax year's £16k from the S&S ISA to a Cash ISA.
Tax year 3 and onwards:  As year 2, rinse & repeat.  

This way you are effectively saving the full £20k per annum into a Cash ISA, unless I've missed something?

Those naturally averse to S&S investment risk could find a lower risk fund and their exposure should never rise much above £16k using this process.  Timing it right, putting the £16k into a S&S ISA late in the tax year and transferring it back out early in the next, should minimise their exposure still further.  Ok, it's a faff, but could it offer a legitimate way to keep your Cash ISA topped up to max, like we enjoy today?   

If, on the other hand, the Treasury blocks the current right to transfer from an S&S ISA to a cash ISA, or imposes further restrictions, that will have much wider implications.  It would certainly discourage me from investing in S&S ISAs in the future, if I could no longer freely switch the funds back to a cash ISA at will.  As people age, the usual advice is to reduce risk by gradually transferring from S&S to Cash.  If the intention is to encourage S&S ISA investing, any restrictions in this area could well backfire.  

Disclaimer:  This is NOT to be taken as financial advice.  Please do your own research.  I will not be held responsible for any decisions you make. 

It won’t, they would never leave such an obvious loop hole 

Recharger

I hope Martin pursues this as much as possible with his normal vigour. On one hand governments want us to save for the future and have provided ISA's as a way of making some savings tax free. Now it appears that this government is going to make yet another big error and alienate even more people. Stocks and Shares ISA's are very useful for longer term gains, for those prepared to take a moderate element of risk and are to be recommended. For those who are risk averse and particularly those senior citizens (who don't have the luxury of the longer term savings) cash ISA's are a safe haven for some tax free gain. They should be looking at increasing, not decreasing the maximum allowed.
Given their mistakes on the low level of entitlement to the winter fuel allowance, possible changes to PIP and other disabled benefits, plus dragging pensioners into more and higher rate tax, lets hope they get a wake up call in the local elections and do not continue targeting those on lower and moderate incomes (which seems totally at odds with their ethics).
Any thoughts welcome!

Riskman

If it is a straightforward limit on new money going into an ISA that's fine.  

The way it reads at the moment is as though Reeves doesn't want anyone to have more than £4k in a cash ISA which is unworkable therefore a worry.

eskbanker

Riskman said:

If it is a straightforward limit on new money going into an ISA that's fine.  

The way it reads at the moment is as though Reeves doesn't want anyone to have more than £4k in a cash ISA which is unworkable therefore a worry.

The way it reads at the moment is that there's endless clickbait in the press and threads on here, all of which indulge in largely pointless speculation that's generally unencumbered by any actual facts, so for everything you've read that implies a huge reduction in aggregate balance caps, there'll be plenty of articles that suggest something completely different....

dunstonh

On one hand governments want us to save for the future and have provided ISA's as a way of making some savings tax free. 

Cash ISAs are typically very short term money whereas S&S ISAs are about saving towards the future.

 Now it appears that this government is going to make yet another big error and alienate even more people. 

its not an error.   Cash ISA allowances are too high. Cash ISAs don't aid the economy and reduce tax revenue.

. For those who are risk averse and particularly those senior citizens (who don't have the luxury of the longer term savings) cash ISA's are a safe haven for some tax free gain. They should be looking at increasing, not decreasing the maximum allowed.

Risk-averse and using cash only can actually increase your risk.  You are just replacing investment risk with shortfall risk and inflation risk.    

Given their mistakes on the low level of entitlement to the winter fuel allowance, possible changes to PIP and other disabled benefits, plus dragging pensioners into more and higher rate tax, lets hope they get a wake up call in the local elections and do not continue targeting those on lower and moderate incomes (which seems totally at odds with their ethics).

Cutting the WFA was a sensible move.   Benefits should be for those that need them. Not those that do not.  Benefits as a whole need cutting back.

Pensioners paying tax is nothing new and they should not be exempt from paying tax.   

The UK has one of the lowest income tax rates in Europe for low earners.  

Plus, if you are a low earner, then you can earn £5000 or more a year in interest without paying tax.    So, why do you need more with a Cash ISA?

eskbanker

BadAnnie said:

I think one major point being missed here is why a lot of people use cash ISAs. Doing a, rather unscientific, poll amongst people I know that have cash isas. They use the Isa as a means of saving cash until they need it for something, this way they are not paying more tax than they need to. Needless to say most of these people are pensioners, many of whom don't have vast savings, but just too much to claim benefits so are trying to make as much use of their money as possible. They can't afford the, long term, stocks and shares volatility, as they are older and possibly have need of the cash more quickly. Once again the government is forgetting its older members of society

Why is it needless to say - it doesn't seem obvious to me at all from what you posted?