New ISA Limits advice

mar7t1n

The point I’m trying to make is this: if you only ever use the cash side of your ISA allowance, you’re leaving free money on the table — and you’ll probably kick yourself later. I have, with the advantage of hindsight. I now pay tax on that cash I didn't shelter when I could.

Markets wobble, then recover history shows us, but you have to play the long game. I heard it, I didn't listen, but it was true. 

The whole point of the rule change is to nudge people toward an investment mindset, but judging by some of the comments, I’m not sure it’ll work. There's many ways this could be done. Especially valuable would be if gov.uk could guarantee your original investment over perhaps a 5 year period as a safety net that props up what they obviously believe in, and history has shown is true.

ColdIron

mar7t1n said:

Especially valuable would be if gov.uk could guarantee your original investment over perhaps a 5 year period as a safety net that props up what they obviously believe in, and history has shown is true.

No moral hazard there at all

Eyeful

mar7t1n said:. 

The whole point of the rule change is to nudge people toward an investment mindset, but judging by some of the comments, I’m not sure it’ll work. There's many ways this could be done. 

1. If the whole point of the rule change was just to nudge people toward an investment mindset, it could be better done by education via:
(a) Maths and history classes in our schools
(b) Commissioning advertising campaigns in the media, like the "Tell Sid" one under Thacker.

2. If you are cynical ,you might think there is another reason behind it.
Like changing ISA rules, so that tax (may by another name) can be raised to pay for this governments promises.

ivormonee

Restricting the cash ISA limit relative to the S&S ISA limit does not turn savers into investors, it just causes resentment.

If the Govt. wanted to encourage people to switch from saving to investing, they would need to put forward ideas about how those people can be informed and educated about investing, so that they feel empowered to do so. Taking away a chunk of the cash ISA allowance in an attempt to force them towards investing does not provide such empowerment but rather serves to increase tax revenues whilst claiming otherwise.

Alexland

ivormonee said:

If the Govt. wanted to encourage people to switch from saving to investing, they would need to put forward ideas about how those people can be informed and educated about investing, so that they feel empowered to do so. Taking away a chunk of the cash ISA allowance in an attempt to force them towards investing does not provide such empowerment but rather serves to increase tax revenues whilst claiming otherwise.

Yes and without the education they could just be creating the next generation of buy high / sell low investors.

ivormonee

Taking away £8k of the cash ISA allowance removes freedom of choice instead of explaining how to make the right choice*. It would be like a Govt. announcement that says "we want people to eat salads because they are healthier than pies, so we will stop supermarkets from selling pies", rather than leaving pies on the shelves and explaining to consumers why salads might be better for them than pies! The reduced cash ISA allowance is nothing more than a stealthy tax raising measure disguised as something for our own benefit. #seeitforwhatitis!

* it also assumes that investing over saving is the right choice, but for some it most certainly wouldn't be.

Mistermeaner

It’s worse than that 

I’d say we’ve all had access to an all you can eat buffet with a limit on annual tray size 

the rules have now changed that you have 2 plates, of different sizes. One for salad the same size as the tray and a smaller plate for pie, with rules that anything that goes on the pie plate reduces the size of the salad plate. Also where as before you could have salad, pie, cheese, tofu and pudding on one tray you now can only have certain things on certain plates and no one is sure exactly what is allowed on which plate yet but all we know is youre supposed to get more salad. If you happen to have loads of salad already however , perhaps more than you want where as before uou could go back to the buffet for cheese and meat or even pie now you can do that you have to instead get another tray that’s heavier and put it there. 

kimwp

What's the other tray in this (spectacular) analogy?

Kim_13

kimwp said:

What's the other tray in this (spectacular) analogy?

The taxable savings account you will have to use if you later decide you have too much in S&S ISAs, since S&S to Cash transfers will have been banned.

mar7t1n

ML will cover this on the show this week — and, the rules don’t actually change until 2027, so there is time for people to get educated. There are endless ways to achieve something, and naturally we’ll all champion whatever approach we think suits us best.

Governments change rules! But history also shows they find it very difficult to claw back what’s already been granted. Once money is inside an ISA, it’s never been taken away. They could one day — remember the talk of a £100k ISA cap — but it’s not happened.

We’ve all had the ability to put £20k per year into a Stocks & Shares ISA for years, yet many of us haven’t used it. So I understand why the change is being pushed: it’s trying to nudge people into an investing mindset.

Speaking as someone who made this mistake myself: don’t take the “I won’t eat salad, I’ll just eat less pie” approach. Use the allowance properly while it’s there. £20k won't be worth much in 40 years time, and it's an easy thing to never increase the limits.