Reeves' ISA review

Kim_13

As the Lifetime ISA is a separate type of ISA and not a Cash ISA, I wonder if this means £12,000 Cash ISA + £4,000 Cash LISA would be possible until LISAs are replaced.

eskbanker

Kim_13 said:

As the Lifetime ISA is a separate type of ISA and not a Cash ISA, I wonder if this means £12,000 Cash ISA + £4,000 Cash LISA would be possible until LISAs are replaced.

As above, the change relates to cash in ISAs not cash ISAs specifically.

Mistermeaner

Would it be a limit on absolute holdings then rather than an annual limit? How would that work re existing holdings ? Very strange 

eskbanker

Mistermeaner said:

Would it be a limit on absolute holdings then rather than an annual limit? How would that work re existing holdings ? Very strange 

It's clearly stated to be the annual limit.

jrawle

Mistermeaner said:

Would it be a limit on absolute holdings then rather than an annual limit? How would that work re existing holdings ? Very strange 

It will be a return to the sort of rules that we had before the distinction between cash and S&S ISAs was removed. There will be an annual limit of the amount of cash you can subscribe into an ISA, in addition to a higher total ISA subscription limit. They will also have to reintroduce restrictions on transfers from S&S to cash ISAs, and rules on keeping cash within a S&S ISA wrapper (although rates are usually so low you'd be crazy to do that anyway).

Mistermeaner

all of which reinforces my point that it would be possible to avoid this limit by holding a cash equivalent fund within a S&S ISA (which is different from holding cash within a S&S isa)

Mistermeaner

also how would one go about trading? I have just sold 20K of a fund in my S&S isa with a view to buying another but will short term hold 20K of cash  

Albermarle

fiddlesticks0 said:

Albermarle said:

fiddlesticks0 said:

Given there's nearly a year and a half until this comes into effect, I wounder what the odds are on this proposal being scrapped before it happens. 

I take it the proposed change doesn't just refer to UK stocks - aren't they generally doing & forecast to continue doing badly, along with pretty much everything else in this country? I thought this was one proposal that was being talked about at some stage, but i could be wrong. Given I know so little about S&S and am risk averse, I highly doubt I'll be one of those people to be nudged into putting the remaining 8k allowance into these. Hopefully enough people will voice the same sentiment and we'll have another u-turn.

Update (from Reuters) 'Analysts, meanwhile, say hopes the money will be invested in Britain may be misplaced if savers instead choose better-performing overseas markets.'

I think the  'investing in Britain' part is only part of the logic. It is also  that long term investments normally grow a lot more than cash savings, so it is trying to nudge a reluctant nation into not being frightened of investing for their own good ( similar to the advice which is often doled out in these forums) .
The public is woefully uneducated on all personal finance matters and many have no idea how/why/what their pensions are invested in.
However there will be many people resistant to the idea ( like yourself ) and I guess most people who are comfortable with investing will already have done so anyway, so it might get scrapped in the end.

I take it the proposed change doesn't just refer to UK stocks - aren't they generally doing & forecast to continue doing badly, along with pretty much everything else in this country?

In the last few years UK stocks have generally underperformed the main US market, but have been doing rather well recently. The FTSE 100 is up 18.5% since January 1st . 

Media report of the stock market tends to sensationalise any drops and not mention any steady rises.

Thanks, given as mentioned I know nothing about S&S but I suspect most people know investments do well long-term, yet so many of us just don't want the risk. I'd imagine that re the historical picture, I'd be worried that it's not a reliable predictor of future performance, especially as we're currenty in a massive time of change and 'disruption' in all kinds of sectors, and who knows what effects AI, for example, is going to have. All this of course may have no ill effects and those stocks may just continue to rise, but I wouldn't really want to be worrying about the fluctuations, when there's a less stressful 'safer' alternative in the form of fixed savings that although haven't done anything spectatular over the decades, they've served me relatively well.

You make a good point that you can never fully rely on history to repeat itself. However there have been plenty of disruptive times in the past - WW2 - Cuban missile crisis/cold war - Mega financial crash in 2008 - Covid etc and in the end the stock markets always come out smiling .
The main point is that there is a risk to saving as well . Interest rates are often below inflation ( not currently) so your money loses value.
In the previous decade interest rates were < 1% and in most years of the decade share based investments boomed.

eskbanker

Mistermeaner said:

also how would one go about trading? I have just sold 20K of a fund in my S&S isa with a view to buying another but will short term hold 20K of cash  

But, as above, the new limit relates to how much cash can be contributed to ISAs, not how much can be held in them (however temporarily), so it's all about controls on depositing the money rather than what happens to it subsequently, although there'd obviously need to be something preventing blatant abuse.

Sea_Shell

Can we also assume that flexible cash ISAs will retain the ability to replace any withdrawn cash back into them (both current and previous years contributions) during the tax year.