Reeves' ISA review

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.

Rich2808

Can this change be retrospective - taking into account existing investments? If there is a 'lifetime' cap - what happens to current investments above this? 

Of course it was done for pensions when the lifetime allowance was cut massively a decade ago from £1.8m to £1.1m - albeit since abolished by Jeremy Hunt a couple of years ago.

So it can be done - even if it unfair.

masonic

Rich2808 said:

Can this change be retrospective - taking into account existing investments? If there is a 'lifetime' cap - what happens to current investments above this? 

Of course it was done for pensions when the lifetime allowance was cut massively a decade ago from £1.8m to £1.1m - albeit since abolished by Jeremy Hunt a couple of years ago.

So it can be done - even if it unfair.

Anything is possible. If going down that road, the simplest option would probably be to abolish cash ISAs and turn them into normal savings accounts, then focus on relief through the Personal Savings Allowance.

Kim_13

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 could apply to both, but the following arguments could also be made:

- For those who don’t wish to get involved with something they don’t understand, i.e. investing, Regular Savers (being the loss leaders that they are) are more likely to result in the customer maintaining the purchasing power of their money. 

- Non-ISA savings are more likely to include funds that are held in cash appropriately - an emergency fund to avoid having to sell stocks and shares at a loss, or the little money that those in a less fortunate financial situation have managed to set aside.

- Now that we have the PSA, the majority of people pay no tax on their savings income, so ISAs are more likely to be used by those who have sufficient assets that they should be investing instead. With ISA rates often below the equivalent taxable accounts after tax, there can be a double loss  made in opting for a Cash ISA (to inflation and also in not securing the best return possible on anything held in cash.)

dcs34

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. 

Not to fear further off-topic but there's a strong case that anti-smoking legislation has been incredibly beneficial for the established tobacco companies:

• Near-impossible barrier to entry for new market players
• Plain packaging means limited ability for competitors to differentiate by "brand" 
• Advertising restrictions means no marketing expenditure
• Import controls maintains stability of country/region-tiered pricing hierarchy

jimjames

george4064 said:

Will be interesting to see what comes of this. Potentially restricting the amount of cash one can hold in an ISA or reducing the cash ISA allowance to just £4k.

Returning the proportions back to what they were when ISAs were originally introduced (Total £7k, cash £3k, S&S £7k or £4k if cash used)

Kim_13

jimjames said:

george4064 said:

Will be interesting to see what comes of this. Potentially restricting the amount of cash one can hold in an ISA or reducing the cash ISA allowance to just £4k.

Returning the proportions back to what they were when ISAs were originally introduced (Total £7k, cash £3k, S&S £7k or £4k if cash used)

Original values adjusted for inflation would be fair enough, the Tories went far beyond that. That would be more like £6k cash rather than the rumoured £4k.

MeteredOut

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.

Are you new here?

MA260

If you want to boost the UK stock markets they should reduce the Share transaction tax which is higher than most major stock markets. This would boost the Uk stock market and also mean pension funds investing in UK would perform better.  That is one of the reasons funds in Uk perform so poorly. They are charged 0.50% for each share purchase, then a lot of the funds charge 0.8% charges per year and on top of that the providers charge 0.40% annual fees, so that it lot of money going in fees if you buy uk shares or funds.

Or at least they could fix it so that shares brought inside Stocks Isa are not charged the 0.5% tax

bristolleedsfan

https://archive.is/20250519201802/https://www.telegraph.co.uk/business/2025/05/19/reeves-backs-down-on-plans-to-cut-cash-isa-limit/

"Speaking to the BBC on Monday, Ms Reeves said: “I’m not going to reduce the limit of what people can put into an Isa, but I do want people to get better returns on their savings, whether that’s in a pension or in their day-to-day savings"