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

westv

This all sounds like a government kite flying exercise.
Or it could just be the media making up stories - as they always do with the 25% pension tax free lump sum.

Cobbler_tone

Section62 said:

Cobbler_tone said:

tghe-retford said:

people are going to pull savings out of the banks. 

Under your bed?

There is little doubt that spending more and saving less is good for the economy. Most relevantly those who save to the grave.

I'd suggest there is significant doubt that is entirely true.... especially where folks spend their way through their meagre savings and become reliant on the state to support them through retirement to the grave.

As with most things in life, there's some balance required.

Absolutely a balance but pointed at the part you didn't highlight. If you have "meagre savings" you are unlikely to actively try and spend it. If people just save to get the highest total (my parents and their generation, plus plenty of younger folk) then so many industries suffer. The point being that people with 6 figures in an ISA will be fine and it will contribute to current needs (or direction) of the government.
With the pension, ISA, tax free saving limit, Premium bonds, under you bed etc....there are still plenty of avenues to minimise tax exposure if that is your driving motivation, I personally think too many people get wrapped up in it as their main focus. They are a group though who believe they shouldn't pay any tax once they stop working. 

hallmark

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.

Section62

Cobbler_tone said:

Section62 said:

Cobbler_tone said:

tghe-retford said:

people are going to pull savings out of the banks. 

Under your bed?

There is little doubt that spending more and saving less is good for the economy. Most relevantly those who save to the grave.

I'd suggest there is significant doubt that is entirely true.... especially where folks spend their way through their meagre savings and become reliant on the state to support them through retirement to the grave.

As with most things in life, there's some balance required.

Absolutely a balance but pointed at the part you didn't highlight. If you have "meagre savings" you are unlikely to actively try and spend it.

Is there any evidence for that assertion?  Anecdotal, but in my experience people with little tend towards spending more (at least proportionally).  One of the possible reasons why they have little savings in the first place.  And often there is no option but to spend what you have.

Cobbler_tone said:

If people just save to get the highest total (my parents and their generation, plus plenty of younger folk) then so many industries suffer. The point being that people with 6 figures in an ISA will be fine and it will contribute to current needs (or direction) of the government.

Have you an idea what a year's fees for a decent care home costs?  Or the cost of having a carer coming in three times a day?

Cobbler_tone said:

With the pension, ISA, tax free saving limit, Premium bonds, under you bed etc....there are still plenty of avenues to minimise tax exposure if that is your driving motivation, I personally think too many people get wrapped up in it as their main focus.

The point of this discussion is the government might tweak the ISA rules to nudge people into investing vs savings - they want people to invest rather than keep it in cash.  The logic being people will be richer and more able to look after themselves, and the investments will support growth in the economy.  This is why the announcement on the 15th will be made at the planned venue.  If the focus was on raising tax the announcement would be made on a hospital visit (preferrably to a children's or cancer ward).  And if the government's priority was getting people to spend rather than invest then she'd be visting a factory of some UK manufacturer.

If your logic is right and people should be encouraged to splurge on tat (likely manufactured in PRC) then they won't be saving or investing as well.  The government collects 20% tax on the spending, but grows the future benefits/social care bill.  And so the intractable circle goes round.

Cobbler_tone said:

They are a group though who believe they shouldn't pay any tax once they stop working.

I don't know anyone who thinks that.  And anyone who might is probably well aware that they pay tax of at least at 20% on most of what they buy... and I've never heard calls for pensioners to be exempted from VAT and duty. (except possibly home energy)

If "spending more and saving less is good for the economy" then this discussion ought to be about the VAT rate being cut.  But it isn't, because a) it isn't true, and b) it isn't what the government want to achieve.

westv

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.

It seems a strange time and place to make such an announcement.
Unless it's being manipulated to "What good news this is!" spin.

Nossen66

This is self serving lobbying by the retail investment industry.  After all, if the cash ISA allowance is cut, I expect many people will make greater use of Money Market or ultra short duration bonds funds/ETFs which are available on retail platforms.  This will not drive investment to equities (and having tax breaks for different investments inherently distorts the efficient allocation of resources) and merely generate fees for platform and retail investment provides.  In any case, encouraging the purchase of already issued equities does not provide investment capital to companies. 

Cobbler_tone

Section62 said:

Cobbler_tone said:

Section62 said:

Cobbler_tone said:

tghe-retford said:

people are going to pull savings out of the banks. 

Under your bed?

There is little doubt that spending more and saving less is good for the economy. Most relevantly those who save to the grave.

I'd suggest there is significant doubt that is entirely true.... especially where folks spend their way through their meagre savings and become reliant on the state to support them through retirement to the grave.

As with most things in life, there's some balance required.

Absolutely a balance but pointed at the part you didn't highlight. If you have "meagre savings" you are unlikely to actively try and spend it.

Is there any evidence for that assertion?  Anecdotal, but in my experience people with little tend towards spending more (at least proportionally).  One of the possible reasons why they have little savings in the first place.  And often there is no option but to spend what you have.

Cobbler_tone said:

If people just save to get the highest total (my parents and their generation, plus plenty of younger folk) then so many industries suffer. The point being that people with 6 figures in an ISA will be fine and it will contribute to current needs (or direction) of the government.

Have you an idea what a year's fees for a decent care home costs?  Or the cost of having a carer coming in three times a day?

Cobbler_tone said:

With the pension, ISA, tax free saving limit, Premium bonds, under you bed etc....there are still plenty of avenues to minimise tax exposure if that is your driving motivation, I personally think too many people get wrapped up in it as their main focus.

The point of this discussion is the government might tweak the ISA rules to nudge people into investing vs savings - they want people to invest rather than keep it in cash.  The logic being people will be richer and more able to look after themselves, and the investments will support growth in the economy.  This is why the announcement on the 15th will be made at the planned venue.  If the focus was on raising tax the announcement would be made on a hospital visit (preferrably to a children's or cancer ward).  And if the government's priority was getting people to spend rather than invest then she'd be visting a factory of some UK manufacturer.

If your logic is right and people should be encouraged to splurge on tat (likely manufactured in PRC) then they won't be saving or investing as well.  The government collects 20% tax on the spending, but grows the future benefits/social care bill.  And so the intractable circle goes round.

Cobbler_tone said:

They are a group though who believe they shouldn't pay any tax once they stop working.

I don't know anyone who thinks that.  And anyone who might is probably well aware that they pay tax of at least at 20% on most of what they buy... and I've never heard calls for pensioners to be exempted from VAT and duty. (except possibly home energy)

If "spending more and saving less is good for the economy" then this discussion ought to be about the VAT rate being cut.  But it isn't, because a) it isn't true, and b) it isn't what the government want to achieve.

We mix in different circles. It’s sad if anyone gears up their savings to fund the possibility of a care home. I’ve personally lost 5 loved ones over the past two years and not one has been near one. Even if they had I wouldn’t be sitting on hundreds of thousands to anticipate it, especially whilst owning a property.
I have seen state/privated funded care at home though. There isn’t a lot of difference other than stumping up for dedicated timing and guess I’m fortunate to have a supportive family.

Each to their own though.

wosTuts

Am I missing something. If I put money in any form of cash savings doesn't the financial institution then invest it? It doesn't just sit in a vault somewhere.

Section62

wosTuts said:

Am I missing something. If I put money in any form of cash savings doesn't the financial institution then invest it? It doesn't just sit in a vault somewhere.

No, they might lend it, for example building societies providing mortgages.

But the ringfencing rules limit what banks can do with retail deposits -

https://www.gov.uk/government/publications/ring-fencing-information/ring-fencing-information

wosTuts

Not considered that and it certainly is true that building society loans will be mainly mortgage related. Banks obviously also sell mortgages but at least some will surely go towards firms borrowing to invest in their companies?