Don't cut Cash ISA limit, MPs urge Government

poseidon1

Can't see any likelihood of gilts being disallowed in S&S ISAs.

Gilts are in no way a cash proxy; can and do go up and down in value daily;  are sufficiently complex in the range and type of gilts available  together with how they are taxed, to baffle and discourage the vast majority of cash savers.

I would warrant that those of us on this forum who do invest in gilts  are a very small percentage of all investors here.

intalex

I'm a gilt newbie (albeit inside tax wrappers) and so far I find them better than fixed rate accounts in that they provide a liquidation option which isn't always at a penalty and can equally be at a premium depending on where market interest rates move. (Like NS&I) I don't think they are protected only up to FSCS limit. If principal remains untouched then coupons are repeated and therefore predictable and easy to track for tax returns (for non tax wrapped). Only downside I've experienced so far is lack of automatic compounding, and sadly brokers don't even offer to waive deal fees to recapitalise coupons into the gilt.

masonic

intalex said:

I'm a gilt newbie (albeit inside tax wrappers) and so far I find them better than fixed rate accounts in that they provide a liquidation option which isn't always at a penalty and can equally be at a premium depending on where market interest rates move. (Like NS&I) I don't think they are protected only up to FSCS limit. If principal remains untouched then coupons are repeated and therefore predictable and easy to track for tax returns (for non tax wrapped). Only downside I've experienced so far is lack of automatic compounding, and sadly brokers don't even offer to waive deal fees to recapitalise coupons into the gilt.

Indeed, government bonds issued by a government with its own currency are at no risk of default. When held to maturity you can get a fixed return, but more interesting for me, index linked gilts held to maturity give a fixed real return, which is not something available in the savings market.

wmb194

poseidon1 said:

Can't see any likelihood of gilts being disallowed in S&S ISAs.

Gilts are in no way a cash proxy; can and do go up and down in value daily;  are sufficiently complex in the range and type of gilts available  together with how they are taxed, to baffle and discourage the vast majority of cash savers.

I would warrant that those of us on this forum who do invest in gilts  are a very small percentage of all investors here.

UK Treasury bills would be the closest to cash: short dated, you buy them at issue and as there's no market so you have to hold them to maturity. The only quirk is that capital gains are classified as interest but when held in an Isa this doesn't matter.

poseidon1

wmb194 said:

poseidon1 said:

Can't see any likelihood of gilts being disallowed in S&S ISAs.

Gilts are in no way a cash proxy; can and do go up and down in value daily;  are sufficiently complex in the range and type of gilts available  together with how they are taxed, to baffle and discourage the vast majority of cash savers.

I would warrant that those of us on this forum who do invest in gilts  are a very small percentage of all investors here.

UK Treasury bills would be the closest to cash: short dated, you buy them at issue and as there's no market so you have to hold them to maturity. The only quirk is that capital gains are classified as interest but when held in an Isa this doesn't matter.

Certainly agree these 3 month to 1 year Bills are the nearest instrument which equate to  conventional short duration bonds available from some banks and building societies ( I have an Oxbury Bank 4.4% 3 month savings bond on the go right now).

However, if few investors here invest in gilts, even fewer partake of short duration bills ( I have done so twice in the last year). HL flagged a new 3 month issue last week,  which I ignored. Worth noting you don't actually know what your rate of return will be until  after the Bill has been issued so lacks the visibility and transparency of return compared to a bank short duration savings bond.

I cannot see the untutored mass of cash savers gravitating to a short term gilt they know nothing about and which even seasoned retail gilt investors seem to largely ignore.

ColdIron

wmb194 said:

poseidon1 said:

Can't see any likelihood of gilts being disallowed in S&S ISAs.

Gilts are in no way a cash proxy; can and do go up and down in value daily;  are sufficiently complex in the range and type of gilts available  together with how they are taxed, to baffle and discourage the vast majority of cash savers.

I would warrant that those of us on this forum who do invest in gilts  are a very small percentage of all investors here.

UK Treasury bills would be the closest to cash: short dated, you buy them at issue and as there's no market so you have to hold them to maturity. The only quirk is that capital gains are classified as interest but when held in an Isa this doesn't matter.

I have five of them to date. I keep some uninvested cash in my SIPP and although HL pay a little interest these are a better home for it. Free to buy, free to mature, and given the £200 cap on ETFs, ITs and gilts, free to hold

artyboy

poseidon1 said:

Can't see any likelihood of gilts being disallowed in S&S ISAs.

Gilts are in no way a cash proxy; can and do go up and down in value daily;  are sufficiently complex in the range and type of gilts available  together with how they are taxed, to baffle and discourage the vast majority of cash savers.

I would warrant that those of us on this forum who do invest in gilts  are a very small percentage of all investors here.

Same here, albeit more for the reason that the government won't want to do anything to discourage us lending them money (in addition to what they already directly take from us...)

jimjames

poseidon1 said:

Can't see any likelihood of gilts being disallowed in S&S ISAs.

When there was a restriction on cash held in S&S ISAs gilts could still be held so I can't see the rules being any different if they were restricted again

intalex

jimjames said:

poseidon1 said:

Can't see any likelihood of gilts being disallowed in S&S ISAs.

When there was a restriction on cash held in S&S ISAs gilts could still be held so I can't see the rules being any different if they were restricted again

Could individuals buy into individual gilts back then? Wasn't it just gilt-based funds?

SnowMan

artyboy said:

poseidon1 said:

Can't see any likelihood of gilts being disallowed in S&S ISAs.

Gilts are in no way a cash proxy; can and do go up and down in value daily;  are sufficiently complex in the range and type of gilts available  together with how they are taxed, to baffle and discourage the vast majority of cash savers.

I would warrant that those of us on this forum who do invest in gilts  are a very small percentage of all investors here.

Same here, albeit more for the reason that the government won't want to do anything to discourage us lending them money (in addition to what they already directly take from us...)

If you use cash from a bank savings account to purchase a new issue of government gilts then your bank's reserve account at the Bank of England will be reduced by the amount of the purchase. The Bank of England pays bank base rate on reserves. So from the government perspective it is a liability swap from 'easy access' (paying base rate) to fixed rate (based on the term of the gilt), not a loan to them.