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

[Hungryhippos123]

Cash ISA limit has been slashed - but some people are exempt | Money News | Sky News

I am asking because I don't understand the logic. Why do over 65s get a higher cash ISA limit? Why not younger people too? I understand the logic behind making the stocks and shares ISA more attractive to encourage investment but why have different rules for pensioners? It strengthens the divide and the feeling of unfairness towards younger people trying to save.

Maybe because older people won’t be saving long term enough to see a return on their investments? Investments can take years to pay off. A 75 year old likely won’t live long enough for it to pay off.

I think the logic is that a stock market ISA will give a better return over the longer term so is to be encouraged for younger people. Older people don’t have the same time horizon.

Quite simple really as younger people will benefit greater by investing in stocks and shares as they have time on their side to grow investments and therefore benefit from those, whereas the older generation wont.

Pretty obviously because they likely have less time available to see a return on what will be a more risky investment.

That said, it’s a very Stick incentive, more Carrot would probably have been better.

Stocks and shares are the ‘right’ answer for long term saving and investment goals.

The value varies over time, but over longer time periods have historically always out performed cash savings.

So for under 65s the set up encourages them to go for the ‘best’ option.

Over 65s Dont necessarily have that longer time frame to see the return over (implication, Theyre going to die soon, or need it for living / care costs) so cant plan on riding out the short term volatility.

To see the benefit of investing you need to be in it long term, 10 years plus, I assume it didn’t make sense to try and incentive older people to do this when they may not live to see returns

I think the idea is that when you’re young you have more time to ride out the ups and downs of the stock market, and in the long run investing in stocks and shares will make more money for you (based on historical performance at least).

Whereas when you’re older predictability is more important, which cash ISAs are better at.

It’s trying to nudge young people in the direction of long term investing.

And because older people may need access to their money

why have different rules for pensioners? It strengthens the divide and the feeling of unfairness towards younger people trying to save.
You see what you want to see.
New stocks and shares investments are not good for pensioners because they won't live long enough to reap the reward. Feel better now?

So the answers above are correct.

But - younger people can have short term cash needs too (eg house deposits), so I think it’s probably still a bit unfair to give over-65s special treatment on this front.

I’d be interested to know how many people are putting £20k a year into their ISA.

In my late 60s and have gradually switched almost all my savings into cash ISAs because I'm going to need most of it sooner rather than later.
Can't risk losing any of it to a crash or poor returns as there will not be time to wait for the market to bounce back.
Have seen family and friends suffer major health setbacks from mid-70s onwards, so figure I've got 10 years of serious fun to fund!

Because shares etc are long term investments whereas cash isa is a guaranteed rate (so low risk) but no potential to perform better

It’s because investing is more suited to those who have a longer timeframe (life). It allows for market corrections and to be able to see the benefits of the investments they’ve made.

Yes they may - so as I said this is Stick not Carrot, they could have left the threshold at £20k cash but done something else to encourage investments.

On the other hand, even having £1k left per month for the £12k limit still puts people in a pretty good financial position - it’s only an annual limit. I imagine there are far more people, young and old, putting less than the £12k limit in their cash ISA than those putting £20k in a year.

Way more people should have their money in S&S ISAs than currently - the British are insanely risk-averse relative to other countries.

If you are worried though, you can buy fairly low-risk ETFs, money market funds etc inside S&S which approximate cash.

A good rule of thumb I was once told is if you have £100 you take that, minus your age and that should be the proportion you split between cash saving and stocks & shares saving because of how long it takes to get a return

So a 20 year old would split their £100, £20 in a cash ISA and £80 in a stocks and shares

But a 70 year old would split it by £70 in cash and £30 in s&s

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

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

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

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.

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

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.

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.

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

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..?