Why do over 65 have a higher Cash ISA limit in the budget??

No one wants pensioners having their money tied up in risky stocks and shares. After retirement most people move their money to low risk accounts as they need to start drawing down.

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Pensioners often use Cash ISAs for money they are taking out of their pension or other vehicles like S&S ISA. It isn't that they are saving new money.

The LISA does have a limit which they should address, and it is likely to be replaced soon anyway. I understand there is a review planned and Martin Lewisis campaigning on the limit of house price and the withdrawal penalties.

However if someone has enough funds that they are putting away more than £12k a year and don't want to use the LISA because they are likely to buy a house worth more than £450k then they are probably savvy enough to explore other options such as low risk funds in a S&S ISA , premium bonds, or just paying tax.

These people may not be hugely wealthy but they are privileged and could reasonably be expected to pay a tiny bit more tax.

I use ISAs and am under 65 so I am not coming at this as someone unaffected.

I also have a LISA but the money is now effectively trapped until retirement or subject to penalties as I can't use it for a house purchase.

I don’t know about Australia but I think one of the differences between the US and the U.K. could be that they don’t have our rather mistaken idea that buying a home is an ‘investment’. Too much of our ‘wealth’ is tied up in unproductive bricks and mortar. Houses decay, they need maintenance - intrinsically they depreciate rather than increase their value!

It is still interesting that large numbers of Americans and Australians (who also experienced the financial crisis) do own stocks though...

I'm sure it's partially explained by Americans just plain having more money to invest, but I think culturally even people who aren't all that well off there still have a bit of money in the stock market.

Hindsight is 20/20 of course, but missing out on the recovery from 2010-2025 was a bigger "loss" than the original crisis shock. I'm really curious about why you don't think this affected your generation's perception of investing too?

The logic will be that S&S should be long term investments, but the real answer is that older people vote.

If younger people want policies more favourable towards them, they need to start voting.

Stocks and shares aren't right for older people who may at short notice need to access money for care. They're a long term investment.

I imagine any young extra high rate tax payers won't be worrying too about missing out on a few ££k of cash ISA savings while they scrimp for their first house deposit

My problem with it is that I started work not long before the 2008 financial crisis. I wasn’t made redundant but lots of colleagues were. In that situation, you’re going to need the savings to live on but they’re going to be heavily reduced. I suspect lots of people my age are getting to the point where they are starting to have some free cash to save, but have the same risk aversion because of remembering that period.

well for one reason you should be rebalancing your investments away from volatile s&s well before you need the funds. If the stock markets crash they need time to recover. If you’ve got a personal pension, you should be doing this if you manage your funds yourself, but many rely on ‘life styling’ which will move the balance from s&s towards bonds etc well before your nominated retirement date .

Money in my Trading 212 S&S ISA can be held as cash, it doesn’t have to be invested, and still earns 4.05% interest, perhaps other ISA providers are the same.

I wonder why 65 is the age cut-off, when state pension age is 66 and will be 67 by then?

Savings for a house (presumably this takes a few years to save but not decades) could be done at low risk with a money market fund inside S&S.

It's really interesting that people here are talking about "risking it in S&S". You can choose the funds you invest in, which can include some very low risk cash-like funds.

Even just a normal broad base index fund is potentially fine for many cases.

S&S ISA doesn't automatically mean
putting all your money into Nvidia.

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Thats why premium bonds are popular among high earners to keep cash.

Effective interest rate a bit low, but 0% tax on it (vs 47% on any savings interest).

The extra high tax rate payers have to pay tax on 100% of their interest in non-ISA accounts.

But you need spare money to put away in an ISA... they're not for the poor.

LISA has a limit on how much you can spend on the house (and how much you can put in each year).

My example of a young person using a cash ISA is a short term need for cash eg buying a house imminently.

Therefore investing the money isn’t financially prudent for their circumstances either - as with a pensioner.

Bizzare ‘if a young person can afford to save £20k they can afford to pay more tax’, but not a pensioner..?

The limit was reduced to encourage people to put money into S&S ISA. That is not a suitable investment for over 65s.

Young people have the LISA for house deposits, and can still put £12k a year EVERY year into a cash ISA. If they can afford to save more than that they can afford to either take the risk on S&S, pay a bit of tax in a standard savings account or suffer the impact of inflation by using premium bonds.

So I can see the reasoning in principle, but then again younger people might at certain times in their lives prefer predictably over higher risk/potential reward - eg if you’re saving for a house move and would be in trouble if the stock market tanked just as you needed your deposit.

According to Google, may or may not be exactly right it's getting on for 2 million who use the full allowance

I dont think it's a major issue that there's an age difference, if young people want to have ready cash they can always put the difference in a non isa saving. Unless they have well over that amount they won't be paying tax anyway

The general rule is not to invest anything into shares that you’ll need to access for 5-10 years+. 65+ people will likely need to withdraw earlier than that, as it is assumed that they are no longer working, and need it in lieu of income.

We vote and the Govt. has some fences to mend after the WFA fiasco.

Oh, I’d missed this detail - blimey, something sensible, as I assume the posts already on this thread have made clear.

Totally agree. Cash is always seen as "safe" but it isn't a good long-term investment due to inflation eroding its value. So I think a bit of a nudge away from it for those with long investment time horizons is sensible.

As you say, stocks and shares ISAs can be invested in various funds with lower risk/volatility than shares if that's what you want. Including a cash-type option, government bonds, corporate bonds etc