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ISA reform update
Comments
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Forget everything I've said above. There's some more detail here dated 23rd June which does say that it will allow MMF funds as long you hold some equity funds alongside. So £99,999 in MMF and £1 in equity would be fine!!!
If that's really what does happen and is allowed then I have to say that it's the most stupidest rule I've ever heard of and what really is the point of this. I'd also be worried that they'd tighten this up in years to come, by which time you're stuck with your S&S ISA and can't transfer out till 65.
Note, just spotted at the end it says for savers from April 2027 "diversified portfolios including some cash-like exposure are allowed". I wonder whether that "some" will get tightened up….
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The stated purpose was a nudge towards people starting to invest, and it seems to be "leading a horse to water" by requiring additional ISA funds to be placed in a S&S ISA and some risk investments purchased.
It removes a barrier from those who have never invested before. I'd still like to see more done educationally, rather than leave it up to people like Martin and this forum.
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@masonic "I'd still like to see more done educationally, rather than leave it up to people like Martin and this forum."
There are plenty of educational resources available if you know where to look. What do you think the gaps are ?
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I don't think the average person is going to find and sign up for an online course of their own volition, or try to educate themselves. Many will have formed unhelpful views about investing that will put them off considering anything beyond a savings account.
Like it or not, a certain amount of spoon-feeding is required for there to be any appreciable improvement in financial literacy in the population at large, and some will need one-to-one help.
Providers, charities, etc, could all play a part in a coordinated campaign that went along with these changes, but so far I see no leadership or support on this issue from government, and very poor comms in general.
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I don't think the average person is going to find and sign up for an online course of their own volition, or try to educate themselves. Many will have formed unhelpful views about investing that will put them off considering anything beyond a savings account.
Correct. Your average punter views investing as spivvy, get-rich-quick gambling where you can readily lose all of your money, taking place in markets, akin to gladiatorial arenas, which almost daily they see described by mainstream media in headlines using high-stress, flight-or-fight vocabulary.
And unhelpful commonplace sayings such as, "Only invest money you are prepared to lose".
Who in their right minds is going to place their carefully-acquired savings into such an environment?
Markets are all of those things, of course, if you choose them to be…. But approached sensibly, something which has become ever easier and cheaper to do, markets and investing are also long-term wealth compounding machines extraordinaire that allow you to grow your hard-earned in manner unlike any other alternative…
This is what your average punter has little grasp of. They've been steered into focusing on loss aversion, and react predictably to that prompt, whereas we see the long-term purchasing power protection and an incredible wealth compounding machine that over a lifetime of investing (vs. cash saving) can deliver outcomes which are an order of magnitude better.
We somehow need to start explaining all of this to large numbers of people.
Along the way, we could also do with explaining some of the very basics - the foundations of the underlying system - such as capital formation and capital structures which underpin this wealth compounding machine, so that people grasp why the machine works.
It's proven very difficult for Government to do all of this, because the people involved - civil servants, MPs, ministers - themselves have almost no clue about any of it, and the people they turn to. eg. in financial services, then have their own agendas, such as asset gathering and fee generation.
It's a massive issue that needs addressing.
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If I sell shares and wait a few days before reinvesting, is this cash taxable at 22% under the new stocks and shares ISA rules
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The cash itself isn't, but interest earned on it would attract the new charge.
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So if you held say £10k in cash for a few days in an AJ Bell ISA, the tax due on interest earnt would be ~30p
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For two of those days AJ Bell probably wouldn't pay anything because it would wait for the trade to settle before paying you interest (T+2 settlement).
"If I sell shares and wait a few days before reinvesting…"
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It's not technically tax as such, but yes, that's the ironic thing about how worked up some people are getting about this - the impact will be negligible for many (such as the poster I was replying to)!
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