Martin Lewis: Cash ISA limit could be cut – this is 'p*ss people off economics'

Exodi

Kennington70 said:

This idea is a car crash waiting to happen.  Millions of people are already investing in the markets through their pensions.  They do so with little or no knowledge of investing, including charges, risk factors and investment returns.  Do we seriously think that millions of people are actually going to actively track their investments to maximise their returns   The first sign of a market crash would lead to panic moves.  This plus the 7-10 day delay before funds would arrive would see negative headlines everywhere.  With a touch cynicism I can already see lawyers looking for weaknesses to exploit in class action suits similar to recent bank scandals.

The existing limit may seem unachievable to most people but older generations with cash from pensions or house sales need a place to put the funds to give them instant access as they approach the final part of their lives.  This includes saving for end of life expenses

I think you're perhaps blinkered on investing, and not considering that many people might rather place the money in taxable savings accounts rather than invest (particularly pensioners who need the money sooner).

It's of course likely that this is the governments true hope also, to raise tax revenues.

Inevitably if everyone did decide to try their hand at investing, a large percentage would end up all in on the S&P500 (a favourite among novice investors of whom google 'highest returns' or something like that), and there's no real benefit to the UK government for this. Likewise pensioners losing large chunks of their pension because they went all in on TSLA and are now looking to the state for assistance doesn't help the government either.

westv

Area88 said:

I’m literally counting down to the announcement with fear and grimace. 

Assuming there actually is one. I still think the Mansion House speech is a strange time to make such an announcement.

Digital_Payback

Given the perceived and actual turmoil of the last year, it’s probably not a good idea for the chancellor to have another confrontation with folk, this time with savers!

Ocelot

Sg28 said:

Surely this is about raising tax rather than encouraging investment. 

In 1999 the cash isa limit was £3000. Adjusted for (the boe's) inflation this gives around £5,750. So why give well off people such a big tax break? Anyone who can afford to put £20k a year into an isa can afford to pay a bit more tax. (For context I've been maxing my isa for several years) 

Martin being concerned about pensioners not wanting to up thier risk profile? Surely thats a huge minority of pensioners still able to stick 20k into an isa each year?

Seems like a good move to me and I would be fine with £5000 limit. Even though it would have a negative effect on me personally. 

If they could afford to put 20k of new money in an ISA every year, I'd agree, but I wait until a FRB (taxable) expired then put 20k into an ISA (of old money).

1983Butlins

As far as Pensions still held/developing, yes it's true about charges and tracking but that's why you pay a pension company to keep track of them, we know that Reeves says that what's already in a cash Isa is safe, but given half a chance she will try and get at it. Why Pensioners are up in arms is the false promises from the Gov. made at the time as thirty to forty years ago they said there is No guarantee you will get a pension when you retire so save as much as you can, but now potentially that's being affected, it's like now someone in their twenties or thirties now putting savings into Isa's or S&S till they are at retirement age which could be at least when they are 78+ and then the Gov saying at that time, we can have some of that. For those pensioners that are let's say still working that's fine about the changes as a cash Isa and S&S Isa they will have time to develop, but it's about those pensioners who ONLY have a pension income and a bit of cash saved up over years of putting hard earned cash away, there needs to be more protection. They all did pay National Insurance and Taxes for years so deserve something back. I feel it could scammers paradise.

boingy

Digital_Payback said:

Given the perceived and actual turmoil of the last year, it’s probably not a good idea for the chancellor to have another confrontation with folk, this time with savers!

They are running out of folks to upset!

Altior

mebu60 said:

Martin also championed the lower of a pounds and pence increase or inflation linked increase if not a ban, but Ofcom are too weak. Sometimes policies have unintended consequences and we need people who identify them and include measures to prevent those consequences.

For unintended consequences (albeit predictable) look at the introduction of competition in the energy sector combined with regulatory oversight failure combined with Mr Milliband's price cap and rising global prices. We're all now paying the price literally every day in the electricity standing charge. And Martin is now campaigning for a 'no standing charge' tariff which isn't any such thing but a transfer of the standing charge to a unit cost. Rather than campaigning for components of the standing charge such as the bale out costs to be stripped out and funded centrally (which we will still pay one way or another but less of a burden on the less well off).

While I'm at it, a non-Martin example, football on tv, removing Sky's monopoly to increase competition. Now three subscriptions are required, Sky/Now, TNT and Amazon, and prices are inflated by the fact that they have to outbid each other for tv packages to show. And it's not real competition, you can't choose which of the three to watch a selected match, you can only view it on the streamer which is covering the match.

Unfortunately it seems to be that the people who attempt to identify potential unintended consequences and suggest measures to mitigate them are labelled as negative 'doomsters' and 'gloomsters' (ABdPJ - July 2019).  

Ofgem being asleep at the wheel is an understatement. Who has faced the accountability for that?

Introducing competition into utilities was very debatable, valid arguments either way but it's not easy to incorporate true competition. However, once it was policy, regulation needed to be watertight (pardon the pun). Quangos/regulators seem to do very little that supports consumers, they appear to be in the pockets of the suppliers. Then the political oversight of the regulators is non existent. 

There's deep rooted incompetency at the state level, and the consumers (us) would still be suffering from it whether these functions were under the purview of private or public organisations. Alas.  

ZeroSum

Whilst everyone is speculating on cash v S&S, people are forgetting that there's a 3rd flavour, the IF ISA thats never been mentioned 

ZeroSum

hallmark said:

There's a subtle but distinct difference between news stories like this and previous articles discussing things like will Cash ISAs be scrapped.

If an article is published in just one outlet i.e. Telegraph or CityAM, speculating on future tax rises, that is essentially meaningless.

When every outlet simultaneously states the same thing i.e. in this case "Reeves to announce large cuts to cash ISA allowance at the Mansion House speech" that means that the Govt has deliberately but unofficially briefed the financial press on something that is a done deal.

This won't be kite-flying, this change will be outlined on 15th July and implemented. The only thing we don't know is the detail.

The same rumours happened at the budget, then nothing happened. They were repeated at spring statement & nothing happened. Each time the snowball gets bigger. The cash limit was to be cut to £5k now its £4k

Given all the bad PR the government has had, wouldn't surprise me if this was straight out of the Boris johnson government playbook. Leak an idea to the media, gage public opinion, then whats actually announced isn't as bad as the rumours & everyone feels better about it.

Cobbler_tone

Area88 said:

I’m literally counting down to the announcement with fear and grimace. 

If this is causing 'fear' then it would suggest your life is probably extremely comfortable in real terms.

What tangible difference is it going to make to most people, considering....you already probably have £500, £1,000 or more tax free interest available before entertaining an ISA? 
There are premium bonds, gifting to family/charity, or spending it. Worst case, someone's tax liability will increase a bit, god forbid! 

My predication is whatever happens with ISA's will cause a mere ripple, as opposed to (say) daring to fiddle with income tax and national insurance. Having said that I didn't hear a lot of noise around NI going up and down. In my environment people don't really understand NI and just saw their net pay changing a bit.

I guess any future reductions to pension lumps sums and lifetime allowances could generate a bit more noise but those people are generally too old to make any. 

Mess with people's benefits on the other hand, that's where the real noise is!