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

poseidon1

mebu60 said:

RogerPensionGuy said:

This possible reduction in the mini cash ISA has been mooted about a lot for a long time like so much stuff they do, pensions instability and the near impossible way they make pension planning a game of luck is my personal buggbear. 

Although maybe some people put too much % of wealth in mini cash ISAs and may of got/get more gains via other investment vehicles like S&S ISAs, it is their choice. 

Any reduction in the mini cash ISA will get lots of unwanted unhappy press/feelings and looking around, I will guess this outcome will be unwanted at this time, so I'll guess this bone will be left alone for now. 

The mini/maxi distinctions went somewhere around 2008. S&S limit was £7k but most you could hold in cash ISA was £3k. There was also an insurance product up to £1k. 

Yes it is useful to remember that the cash ISA limit was not always as generous as it is now.

 For my part my entire annual ISA allowances were always devoted to stocks and shares until early 2023, when cash ISA rates started to rise significantly on the back of B of E base rate increases.

Since the rationale behind this proposed reduction to cash isa limits is to drive investors towards UK  equity investing ( via ISA), it will be interesting to see if QMMFs ( quasi cash)  might be barred. Also what of government gilts and corporate bonds ( a sizeable component of my S & S ISA) ? Clearly neither of those are equities . 

Be interesting to see the finer details of the proposal, but agree the  intial indicators are not good for the great swathe of risk averse ISA savers.

ColdIron

poseidon1 said:

mebu60 said:

RogerPensionGuy said:

This possible reduction in the mini cash ISA has been mooted about a lot for a long time like so much stuff they do, pensions instability and the near impossible way they make pension planning a game of luck is my personal buggbear. 

Although maybe some people put too much % of wealth in mini cash ISAs and may of got/get more gains via other investment vehicles like S&S ISAs, it is their choice. 

Any reduction in the mini cash ISA will get lots of unwanted unhappy press/feelings and looking around, I will guess this outcome will be unwanted at this time, so I'll guess this bone will be left alone for now. 

The mini/maxi distinctions went somewhere around 2008. S&S limit was £7k but most you could hold in cash ISA was £3k. There was also an insurance product up to £1k. 

Since the rationale behind this proposed reduction to cash isa limits is to drive investors towards UK  equity investing ( via ISA), it will be interesting to see if QMMFs ( quasi cash)  might be barred. Also what of government gilts and corporate bonds ( a sizeable component of my S & S ISA) ? Clearly neither of those are equities.

I don't believe the general thrust is to encourage people towards equities in general, I don't think they even want to promote or enable UK equities listed on the LSE. My understanding is that the direction of travel is to drive cash towards unlisted private UK equity with all that that entails, but that's pensions and not necessarily ISAs

I think the purpose behind the reduction to the cash allowance is as simple as it appears

Albermarle

Yes it is useful to remember that the cash ISA limit was not always as generous as it is now.

Plus to put things in some perspective, the ability for UK savers and investors not to pay tax by using ISA's, is a tax concession that is very generous by global standards.

EthicsGradient

ColdIron said:

poseidon1 said:

mebu60 said:

RogerPensionGuy said:

This possible reduction in the mini cash ISA has been mooted about a lot for a long time like so much stuff they do, pensions instability and the near impossible way they make pension planning a game of luck is my personal buggbear. 

Although maybe some people put too much % of wealth in mini cash ISAs and may of got/get more gains via other investment vehicles like S&S ISAs, it is their choice. 

Any reduction in the mini cash ISA will get lots of unwanted unhappy press/feelings and looking around, I will guess this outcome will be unwanted at this time, so I'll guess this bone will be left alone for now. 

The mini/maxi distinctions went somewhere around 2008. S&S limit was £7k but most you could hold in cash ISA was £3k. There was also an insurance product up to £1k. 

Since the rationale behind this proposed reduction to cash isa limits is to drive investors towards UK  equity investing ( via ISA), it will be interesting to see if QMMFs ( quasi cash)  might be barred. Also what of government gilts and corporate bonds ( a sizeable component of my S & S ISA) ? Clearly neither of those are equities.

I don't believe the purpose is to encourage people towards equities in general, I don't think they even want to promote or enable UK equities listed on the LSE. My understanding is that it will be used to drive cash towards unlisted private UK equity with all that that entails

It would take a lot more than a change in the cash ISA limit to do that. The people putting lots in cash ISAs are extremely unlikely to look at unlisted private equity; I think the best the government could get would be them investing in gilts. If this cut in the cash limit (the lobbyists just want more in S&S ISAs, regardless of where it's invested) does happen, I think the government will just be hoping more people pay a bit of tax on their interest.

ColdIron

Yes, I've clarified my post

hallmark

I would bet very very heavily that if the Cash ISA allowance is cut say from £20000 to £5000 the vast majority of money that would have gone into Cash ISAs and now can't (i.e. amounts above £5,000) will simply go into taxable savings accounts.

The people who understand shares, understand the risks and choose to invest in them already invest in them.  The people who don't are going to tend to be those saving for a house deposit, those elderly or infirm, & those who will simply never understand or trust sharedealing.

The first two categories should not be investing in shares and the third will not.

Area88

Albermarle said:

Yes it is useful to remember that the cash ISA limit was not always as generous as it is now.

Plus to put things in some perspective, the ability for UK savers and investors not to pay tax by using ISA's, is a tax concession that is very generous by global standards.

Not when we are already one of the most taxed countries in the world. Add high cost of living too. 

mebu60

hallmark said:

I would bet very very heavily that if the Cash ISA allowance is cut say from £20000 to £5000 the vast majority of money that would have gone into Cash ISAs and now can't (i.e. amounts above £5,000) will simply go into taxable savings accounts.

The people who understand shares, understand the risks and choose to invest in them already invest in them.  The people who don't are going to tend to be those saving for a house deposit, those elderly or infirm, & those who will simply never understand or trust sharedealing.

The first two categories should not be investing in shares and the third will not.

This ^^ ^^. 

ColdIron

It's OK for me as, in my 60s, I have a healthy ISA balance

But I can imagine much intergenerational grizzling. Those 'rich' old people getting better breaks and opportunities than the young

And they would be right

Albermarle

Area88 said:

Albermarle said:

Yes it is useful to remember that the cash ISA limit was not always as generous as it is now.

Plus to put things in some perspective, the ability for UK savers and investors not to pay tax by using ISA's, is a tax concession that is very generous by global standards.

Not when we are already one of the most taxed countries in the world. Add high cost of living too. 

Although UK taxes have increased since Covid, in the global league table of % tax take we are still around the middle, . Far behind places like Sweden, France and Belgium.