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

Pat38493

jimjames said:

Jordan72 said:

So if I receive dividends in my S&S ISAs (currently about 50 payments per year worth maybe £40K) I'm going to have to reinvest them immediately to avoid being penalised? This is utterly ludicrous and unworkable. 

No that's not the case at all. This was the situation prior to 2014 and there was no penalty for holding cash awaiting investment

My guess is that platforms will just take the easy way out and stop paying any interest atall on uninvested cash (frankly there are still a few that already do that even today).  

If the objective of this is to get people who normally use Cash ISAs to move some of their money to S&S ISA and invest it, it seems a bit mad to me.  Surely the better way would be to abolish cash ISAs completely and then provide a lot more eduation about investing.  

m_c_s

I think we will have a different budget from a different chancellor next year and a lot of this may change anyway; might even get worse who knows! So it's best just to carry on as normal and keep investing and saving in whichever type of ISA best suits your needs.
AJ bell coming out against the changes will probably not do much in isolation. They only have £30bn in ISAs out of a total of £750bn in all UK financial institutions so not sure how much they can influence. It will probably take the big guns like HL, Fidelity and Vanguard to move the needle on policy changes. 
Martin Lewis also has the profile to perhaps influence on this.
Let's hope something does change.

jimjames

Pat38493 said:

jimjames said:

Jordan72 said:

So if I receive dividends in my S&S ISAs (currently about 50 payments per year worth maybe £40K) I'm going to have to reinvest them immediately to avoid being penalised? This is utterly ludicrous and unworkable. 

No that's not the case at all. This was the situation prior to 2014 and there was no penalty for holding cash awaiting investment

My guess is that platforms will just take the easy way out and stop paying any interest atall on uninvested cash (frankly there are still a few that already do that even today).  

iWeb is one. Doesn't bother me as I only hold cash waiting for investment

Ocelot

I had an Insurance ISA (remember those?), which got transferred to an equity ISA when they got scrapped. It seems to be doing ok, however I get charged a monthly management fee. Is this normal for an ISA?

MeteredOut

Ocelot said:

I had an Insurance ISA (remember those?), which got transferred to an equity ISA when they got scrapped. It seems to be doing ok, however I get charged a monthly management fee. Is this normal for an ISA?

It is normal for some ISAs. It depends on the provider.

intalex

Pat38493 said:

My guess is that platforms will just take the easy way out and stop paying any interest atall on uninvested cash (frankly there are still a few that already do that even today).

An idea would be to accrue fee credit instead, which would be used towards paying S&S platform / dealing fees.

Alexland

intalex said:

An idea would be to accrue fee credit instead, which would be used towards paying S&S platform / dealing fees.

Yes I think it would cause an industry move away from paying interest on uninvested cash and more towards providing a totally 'free' service (although with T212 you can currently have both interest and free service) similar to how many 'free' bank accounts work 

boingy

It would feel very unfair to force the sale of any "cash-like" investments already inside an S&S ISA wrapper, especially if you are not allowed to transfer the proceeds across to a Cash ISA. Surely the sensible thing would be to apply the rules to new investments only. Otherwise someone with a balanced S&S ISA has to choose between pulling money out of the ISA or reinvesting it in more risky things.

Sea_Shell

Does this change have any bearing on the ability to inherit an additional ISA allowance?

If the deceased held, say £50,000 in cash ISA and £50,000 in a S&S ISA, could the survivor use the whole £100k additional allowance to hold cash, if they so chose, or do they only inherit the relevant TYPE of ISA allowance, like for like?

poseidon1

Sea_Shell said:

Does this change have any bearing on the ability to inherit an additional ISA allowance?

If the deceased held, say £50,000 in cash ISA and £50,000 in a S&S ISA, could the survivor use the whole £100k additional allowance to hold cash, if they so chose, or do they only inherit the relevant TYPE of ISA allowance, like for like?

If surviving spouse over 65, presumably the cash ISA limit irrelevant to that age group.

Under 65 can't see any logical reason the survivor spouse could get a beneficial outcome from the deceased, that they themselves would not be  otherwise eligible for.