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

Sea_Shell

Shink said:

According to current plans, money invested in S&S ISA’s can NEVER be fully de-risked in the future, without removing them from the tax free ISA wrapper. i.e. you can’t ever transfer it to a cash ISA. That’s a massive disincentive to invest. Surely the normal arc is to convert S&S investments to cash as you get older?

Only for the under 65's ??

Or is it going to be a blanket ban on transfers, full stop, regardless of age.   

Time2Go_25

probably for just the under 65s, but nobody knows as it's subject to consultation.

dunstonh

Surely the normal arc is to convert S&S investments to cash as you get older?

You generally find people de-risk as they get older but not to the extent of going to 100% cash unless they don't have much money to begin with.

However, the published info so far, suggests that over 65s will be exempt.

LHW99

So if peopple hold cash "too long" (whatever that will be) in an S&S ISA will it always be subject to this tax / charge? It could mean people were exempt from tax on interest within their PSA outside an ISA, but charged / taxed on money with a "tax free" account.

Will they be able to apply to HMRC for a refund (via SA)?

DavidT67

One potential workaround for this possible restriction on S&S to Cash ISA transfers would be to transfer to from the S&S ISA to an IF ISA, and then from the IF ISA to a Cash ISA.  

But until legislation is enacted and ISA providers adapt systems and decide which transfer options they will support, it's all hypothetical. 

DavidT67

Another workaround would be to invest in a fixed income fund which isn't 'cash-like'.  There are funds which target SONIA plus x%, they aren't entirely risk-free or cash-like, but are less volatile than equity funds.

Shink

Time2Go_25 said:

probably for just the under 65s, but nobody knows as it's subject to consultation.

Yes. I had missed that the HMRC guidance limited this block on transfers, to cash ISAs, to under 65’s.
That’s not as bad.

Shink

DavidT67 said:

One potential workaround for this possible restriction on S&S to Cash ISA transfers would be to transfer to from the S&S ISA to an IF ISA, and then from the IF ISA to a Cash ISA.  

But until legislation is enacted and ISA providers adapt systems and decide which transfer options they will support, it's all hypothetical. 

The transfer ban applies to IF ISAs too.

jimjames

DRS1 said:

LHW99 said:

The question also arises will over 65's be allowed the MMF's that under 65's are prohibited from using - or will platforms decide it is too much trouble and rule them out for everybody?

Once you look into the bare bones of the plans there seems to be more and more that will need ironing out in the next 18 months if the timetable is to be kept.

but perhaps the simplest way would be to say you earn no interest on uninvested cash.  An encouragement to invest it!

That's how it was prior to 2014 so not really a big change

LHW99 said:

So if peopple hold cash "too long" (whatever that will be) in an S&S ISA will it always be subject to this tax / charge? It could mean people were exempt from tax on interest within their PSA outside an ISA, but charged / taxed on money with a "tax free" account.

Or paid no interest as before so no tax charge due. If the cash is just waiting reinvestment then no interest shouldn't be a problem and gives incentive to invest it again

Cobbler_tone

I haven't seen or read why they have plucked an arbitrary age of 65 out of the air. The state pension age from 2010? Free bus pass for most of the nation?
I appreciate not everything needs to be tied together but a strange number to pick.