HMRC will stop cash-like investments in S&S ISAs

Albermarle

Pat38493 said:

SnowMan said:

Thanks for spotting that Pat38493, had you not done so I wouldn't have searched for the HMRC original document and posted it up on the other thread.

You might want to change your thread title to 'HMRC will stop cash-like investments in S&S ISAs' and edit into the opening post a link to the official document, as I am guessing most of us prefer to see (or at least also see) the official source than someone's second hand spin of the official source, which requires a log in in any case.  

Thanks I have done that.  I actually saw the article linked on a retirement facebook group.

In that HMRC page there does not seem to be any mention of forestalling before April 2027, so it seems like there is nothing to stop anyone from transfer all their S&S ISA holdings to cash ISA before then.

I would guess though that most people who have S&S ISAs now, have them for a reason. Would not make sense to suddenly move all your ISA investments to cash, just to forestall the legislation.
Ok there might be some niche cases, but otherwise it would be a drastic change in your portfolio strategy.

SnowMan

Pat38493 said:

SnowMan said:

Thanks for spotting that Pat38493, had you not done so I wouldn't have searched for the HMRC original document and posted it up on the other thread.

You might want to change your thread title to 'HMRC will stop cash-like investments in S&S ISAs' and edit into the opening post a link to the official document, as I am guessing most of us prefer to see (or at least also see) the official source than someone's second hand spin of the official source, which requires a log in in any case.  

Thanks I have done that.  I actually saw the article linked on a retirement facebook group.

In that HMRC page there does not seem to be any mention of forestalling before April 2027, so it seems like there is nothing to stop anyone from transfer all their S&S ISA holdings to cash ISA before then.

Thanks.

If we take the stated motivation behind this at face value, that is to encourage savers to consider investing too, I guess there isn't any real need to currently stop transfers from stocks and shares ISAs back to cash ISAs.

Anyone who has invested already in a stocks and shares ISA is presumably comfortable with investing. Even if they transfer some money over to a cash ISA you assume they aren't motivated by 'fear' of investing.

Post April 2027, someone who is insistent they will only save and not invest might put 8K in a stocks and shares ISA and then immediately transfer it over to a cash ISA. So preventing this transfer back encourages them to try investing to keep the higher 20K allowance.

I'm not saying this is a good way to encourage investing over just saving, just trying to logic out what they think they are doing.

Mistermeaner

just my situation i appreciate but my thinking:

Im 46. I have a LISA with 50K in it, my partner has a LISA with 40K in it. Both are fully invested in equities

I have a cash ISA with HL (which allows onwards investment in a selection of 3rd party cash ISA's) with £13K in it.

I have a S&S ISA with Charles Stanley, with 60K in. Currently ~30K equities, 10K short term money market fund and 20k short term fixed income funds (which themselves are ~50% invested in money markets)

The LISA's i am happy to leave as is so i guess dont figure in this equation

The Cash ISA i was just leaving alone, no active payments in set up this my 'emergency' fund

The S&S ISA is where I am building my pre-pension retirement fund, currently paying give or take 20K per annum. It was recently all in equities but as I am hopefully ~5 years away from accessing this as part of early retirement I de-risked it substantially by going to 50% cash or close to cash equivalents. I kept it in S&S isa as should there be a crash I am not adverse to buying back into equities, but likewise I am happy to keep as cash or close equivalents for now as I have all my other equity investments including over a million in pensions.

I am really interested to see how this proposal will be applied in practice. 

- will i be forced to sell my cash equivalents in the S&S isa?

- will i be taxed differently on them? and if so at what rate (i am a high rate tax payer)?

- can i transfer from a S&S isa to a cash isa (and visa versa)? how quickly and flexibly can this be done i.e. could i do this with enough freedom to purchase equities in the event of a crash? if transfers are limited will you have 'cash out' and back in to go from one isa to another?

- do i move my cash equivalents from the S&S isa to the cash ISA now in case that door is closed later?

- where is the line drawn on what is considered a cash equivalent fund?

- is the 12K limit an absolute or annual thing? 


too many questions without answers at the moment, none of which makes me think i must go and invest more!!!

FIREDreamer

I transferred 40% of my Hargreaves S&S ISA to their cash ISA earlier this month.

My logic …

(1) Markets feel very toppy and ripe for a fall.
(2) Portfolio was a mess with over 50 holdings, 200 dividends a year, so sold everything and all 60% will be going into global trackers when i feel comfortable. Spread between 5 providers, say.
(3) I have enough so why not dial down the overall risk as the government takes 40% as inheritance tax if the ISA is not spent (and assets still going up post retirement)?
(4) The cash ISA will go to the kids whilst I am still alive for a substantial property deposit.

Pat38493

Mistermeaner said:

just my situation i appreciate but my thinking:

Im 46. I have a LISA with 50K in it, my partner has a LISA with 40K in it. Both are fully invested in equities

I have a cash ISA with HL (which allows onwards investment in a selection of 3rd party cash ISA's) with £13K in it.

I have a S&S ISA with Charles Stanley, with 60K in. Currently ~30K equities, 10K short term money market fund and 20k short term fixed income funds (which themselves are ~50% invested in money markets)

The LISA's i am happy to leave as is so i guess dont figure in this equation

The Cash ISA i was just leaving alone, no active payments in set up this my 'emergency' fund

The S&S ISA is where I am building my pre-pension retirement fund, currently paying give or take 20K per annum. It was recently all in equities but as I am hopefully ~5 years away from accessing this as part of early retirement I de-risked it substantially by going to 50% cash or close to cash equivalents. I kept it in S&S isa as should there be a crash I am not adverse to buying back into equities, but likewise I am happy to keep as cash or close equivalents for now as I have all my other equity investments including over a million in pensions.

I am really interested to see how this proposal will be applied in practice. 

- will i be forced to sell my cash equivalents in the S&S isa?

- will i be taxed differently on them? and if so at what rate (i am a high rate tax payer)?

- can i transfer from a S&S isa to a cash isa (and visa versa)? how quickly and flexibly can this be done i.e. could i do this with enough freedom to purchase equities in the event of a crash? if transfers are limited will you have 'cash out' and back in to go from one isa to another?

- do i move my cash equivalents from the S&S isa to the cash ISA now in case that door is closed later?

- where is the line drawn on what is considered a cash equivalent fund?

- is the 12K limit an absolute or annual thing? 


too many questions without answers at the moment, none of which makes me think i must go and invest more!!!

To comment on a couple of points here.

The 12K is an annual limit to cash ISA.

According to the note from HMRC, you will not be able to transfer money from an S&S ISA to a cash ISA (it does not say that you can’t transfer the other way around).

The implication is that according to HMRC, you will be taxed differently if you insist on holding such investments in an S&S ISA - presumably they will be taxed as savings interest as if they were not in the ISA.  However, I don’t think there is anything to stop an ISA provider from telling you that they no longer support those investments in S&S ISA if they don’t want the administrative headache, so you might not be legally forced to sell them but your provider might make you do it.

Where is the line drawn - see previous posts on this thread - nobody knows yet but when there was a similar situation in place many years ago, it was mainly MMF and cash interest on S&S cash that was impacted.  It could also be that individual bonds or gilts held to maturity could also be impacted.  I would hope that it would not impact on most bond funds but we don’t have further detail yet.

Time2Go_25

Mistermeaner said:

just my situation i appreciate but my thinking:


- can i transfer from a S&S isa to a cash isa (and visa versa)? how quickly and flexibly can this be done i.e. could i do this with enough freedom to purchase equities in the event of a crash? if transfers are limited will you have 'cash out' and back in to go from one isa to another?

Until implemented you are free to transfer back and forwards as you like. Once in place and assuming you are under 65 you will not be able to transfer from S&S to cash ISAs, so you'd probably have to cash out and then you'd only be able to move £12k per year into a cash ISA. Subject to the consultation they are going to do.

poseidon1

Personally I see absolutely no justification in exempting over 65s from a charge on interest earned on cash in S&S isa.

It is diversive enough that that cohort continues to benefit from the £20k cash ISA limit, without making financial  institutions jump through hoops to devise systems to avoid a charge on interest in S&S isas, based on age criteria. Charge everyone and be done with it. I am over 65 by the way.

Mistermeaner

another musing; how does one go about derisking a LISA prior to gaining access at age 60?

Mistermeaner

i can understand how a simple rule like 'no more than 12k into a cash isa per year' can be implemented but when you start messing around with deemed cash like equivalents in S&S ISA's its gets very very complicated very quickly, worse still when you also add this arbitrary age limit. It just smacks of someone who doesn't understand some basic investing and saving fundamentals

westv

I imagine it'll be delayed and watered down.