New ISA Limits advice

clairec666

mar7t1n said:

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.

Remember that not everyone can put away £20000 a year.

ivormonee

Not only have the Govt. taken away some of the pies from the supermarket shelves, they are consulting on what we can include in our salad too. Tomatoes (equities) and cucumber (long dated bonds) are fine, but they're saying: "We're afraid you can no longer have lettuce or onion!" (money-market funds and short duration bonds).

Our salad days (eat what you want - put what you want in your S&S ISA) are over!

mar7t1n

clairec666 said:

mar7t1n said:

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.

Remember that not everyone can put away £20000 a year.

Of course - they say only 10% of people pay tax on interest. Which means either:

1. They have managed to shelter it all from tax already - good on them - what I'm advocating.
2. They have got less than about £25k, so don't pay tax - these rules are pretty meaningless anyway. 
3. The money is in accounts they've had forever and pays a pittance in interest. The rules don't apply, and those people clearly don't have any interest in sites like this.
   

On point 2. Note - you can't go back and claim your unused allowances.

Aristotle67

 I am eight years away from accessing my state pension and am not an investor. I have been utilising the full £20,000 ISA allowance each year with a new Cash ISA to get as much into the tax-free wrapper as I can. The annual income in interest is useful to me and the tax free benefit will be very handy when I turn 67.

I read this point a lot about inflation eroding cash pots and I understand this. I also understand the point about a S&S ISA potentially being the best possibility of beating inflation. But surely, if a S&S ISA performed poorly in comparison to a Cash ISA (which I accept is not typical, but is nonetheless possible) then the balance in the S&S ISA is also subject to being eroded by inflation, is it not? And as it would be less than the balance in the Cash ISA, anyone in that situation would be worse off, wouldn't they?

Even if I was less risk averse, with just eight years to go I wouldn't be attracted to investing in a S&S ISA. So for me the changes are not what I wanted to see. 

ColdIron

mar7t1n said:

So I understand why the change is being pushed: it’s trying to nudge people into an investing mindset.

I am more cynical than you. I believe the primary reason for this change is to increase tax revenue on cash by stopping the ability to shelter so much

When the govt. introduced the radical pension freedoms in April 2015 that allowed flexi access drawdown, such was the concern that people would be unable to manage their own investments (rather than blow it all on a Lamborghini) they offered everyone a free Pension Wise appointment. I see no such proposals with this. It looks like it's being left to consumer champions like Martin Lewis (along with less, shall we say, honourable sources)

It's a fig leaf that actually complicates ISAs

Alexland

Aristotle67 said:
But surely, if a S&S ISA performed poorly in comparison to a Cash ISA (which I accept is not typical, but is nonetheless possible) then the balance in the S&S ISA is also subject to being eroded by inflation, is it not? And as it would be less than the balance in the Cash ISA, anyone in that situation would be worse off, wouldn't they?

Yes but the S&S ISA gives you access to investment options that are highly likely to beat both cash rates and inflation over the long term. If you wanted to be 100% sure of beating inflation you can buy a UK inflation linked government bond such as TR50 that will grow at inflation plus 2% over the next 25 years with some market price volatility along the way.

Alexland

ColdIron said:
I am more cynical than you. I believe the primary reason for this change is to increase tax revenue on cash by stopping the ability to shelter so much

I doubt it will even raise much tax, the cynic in me thinks this is just a change to make things difficult for people.

ColdIron

Alexland said:

ColdIron said:
I am more cynical than you. I believe the primary reason for this change is to increase tax revenue on cash by stopping the ability to shelter so much

I doubt it will even raise much tax, the cynic in me thinks this is just a change to make things difficult for people.

Indeed. They never seem to take behavioural changes into account and the Laffer Curve is a bend at Silverstone or Brands Hatch

Notepad_Phil

ColdIron said:

Alexland said:

ColdIron said:
I am more cynical than you. I believe the primary reason for this change is to increase tax revenue on cash by stopping the ability to shelter so much

I doubt it will even raise much tax, the cynic in me thinks this is just a change to make things difficult for people.

Indeed. They never seem to take behavioural changes into account and the Laffer Curve is a bend at Silverstone or Brands Hatch

Talking of behavioural changes, I wonder what behavioural change we'd see at the Treasury/No 11 if a big market crash came along over the next year - it probably wouldn't have to be that big either for them to realise the headlines that could be generated of impoverished forced ISA investors, especially damaging if there was a down turn in the run up to the next general election.

jimjames

Aristotle67 said:

Even if I was less risk averse, with just eight years to go I wouldn't be attracted to investing in a S&S ISA. So for me the changes are not what I wanted to see. 

8 years is only the time to start drawing pension though, not the end of the time you need to invest for. Assuming you're 60 then you could have another 25 years or more needing that money invested.