Reeves' ISA review

Hoenir

george4064 said:

Numerical evidence suggests that, over the long-term, diversified investments are more likely to meet or exceed the rate of inflation 

Define long term.  Define diversified. 

subjecttocontract

I see nothing wrong with putting a warning on cash ISAs but they put health warnings on cigarette packets and I'm not convinced that more than a tiny, tiny percentage of smokers stop as a result of that warning. 

masonic

subjecttocontract said:

I see nothing wrong with putting a warning on cash ISAs but they put health warnings on cigarette packets and I'm not convinced that more than a tiny, tiny percentage of smokers stop as a result of that warning. 

Cash ISAs are somewhat less addictive though.

SnowMan

subjecttocontract said:

I see nothing wrong with putting a warning on cash ISAs but they put health warnings on cigarette packets and I'm not convinced that more than a tiny, tiny percentage of smokers stop as a result of that warning. 

Agree with that.
The point is that stocks and shares ISAs have a warning along the lines of "the value of investments can go down, and you may not get back the original amount you invested".
So why should cash ISAs not also have a warning? By avoiding stocks and shares ISAs and sticking with cash ISAs you are not avoiding risk, although it appears that way from the lack of warning, but instead substituting one risk with another that “even after the addition of tax free interest, the spending power of money saved in a cash ISA may decrease over time due to prices increasing”
So there perhaps should either be a similar appropriate warning for both stocks and shares ISAs and cash ISAs or no warning for either.

Hoenir

SnowMan said:

subjecttocontract said:

I see nothing wrong with putting a warning on cash ISAs but they put health warnings on cigarette packets and I'm not convinced that more than a tiny, tiny percentage of smokers stop as a result of that warning. 

Agree with that.
The point is that stocks and shares ISAs have a warning along the lines of "the value of investments can go down, and you may not get back the original amount you invested".
So why should cash ISAs not also have a warning? By avoiding stocks and shares ISAs and sticking with cash ISAs you are not avoiding risk, although it appears that way from the lack of warning, but instead substituting one risk with another that “even after the addition of tax free interest, the spending power of money saved in a cash ISA may decrease over time due to prices increasing”
So there perhaps should either be a similar appropriate warning for both stocks and shares ISAs and cash ISAs or no warning for either.

There's no permanent capital loss with cash. With equities and corporate debt there's a risk that the entity might go bust. The investment becomes worthless. 

Inflation is also a personal thing. Look at the basket of goods it's based on. My current expenditure bears little relation to what's currently included. 

subjecttocontract

Isn't the expectation that the public will read the warning, understand it, take it's message on board and think again about wether they want it. My point is that the message is likely to have little or no effect.

clairec666

masonic said:

subjecttocontract said:

I see nothing wrong with putting a warning on cash ISAs but they put health warnings on cigarette packets and I'm not convinced that more than a tiny, tiny percentage of smokers stop as a result of that warning. 

Cash ISAs are somewhat less addictive though.

Regular savers, on the other hand... 😁

badger09

masonic said:

subjecttocontract said:

I see nothing wrong with putting a warning on cash ISAs but they put health warnings on cigarette packets and I'm not convinced that more than a tiny, tiny percentage of smokers stop as a result of that warning. 

Cash ISAs are somewhat less addictive though.

Not for me. 

Managed to give up smoking (up to 40 a day on a bad day😱) on 2nd attempt, many years ago. Never considered giving up on Cash ISAs. 

friolento

SnowMan said:

masonic said:

Albermarle said:

SnowMan said:

It's been suggested that there should be a warning when you save in a cash ISA (like there is with investments) and I think that has some merit. Perhaps someone can improve on my attempt

Cash ISAs may (and often do) earn interest at less than the rate at which prices increases, and so you may get back considerably less than what you saved if you take into account what that money can buy.

I think many will just see the words' get back considerably less' and misunderstand them ( wilfully in some cases)

I will have a go.

Cash ISAs and other savings account may (and often do) earn interest at less than the rate at which prices increase. This means that over time the value of your savings in terms of what they will buy, may slowly decrease. 

Why not simply "even after the addition of tax free interest, the spending power of money saved in a cash ISA may decrease over time due to prices increasing".

Like that version

Why would we need this warning just for cash ISAs but not for non-ISA savings accounts?  

masonic

friolento said:

SnowMan said:

masonic said:

Albermarle said:

SnowMan said:

It's been suggested that there should be a warning when you save in a cash ISA (like there is with investments) and I think that has some merit. Perhaps someone can improve on my attempt

Cash ISAs may (and often do) earn interest at less than the rate at which prices increases, and so you may get back considerably less than what you saved if you take into account what that money can buy.

I think many will just see the words' get back considerably less' and misunderstand them ( wilfully in some cases)

I will have a go.

Cash ISAs and other savings account may (and often do) earn interest at less than the rate at which prices increase. This means that over time the value of your savings in terms of what they will buy, may slowly decrease. 

Why not simply "even after the addition of tax free interest, the spending power of money saved in a cash ISA may decrease over time due to prices increasing".

Like that version

Why would we need this warning just for cash ISAs but not for non-ISA savings accounts?  

It should be both. The equivalent risk warnings for investments are mandated for non-ISA investment accounts as well. Non-ISA savings accounts are at just as much risk of being used inappropriately for long term holdings, exposing the consumer to shortfall and inflation risk. Though there are some niche savings products where the guaranteed return exceeds that which could reasonably be hoped for by taking on additional capital risk.