What’s Reeves up to with ISA allowances?

[nahthatsnotforme]

I’ve read a couple of news items today suggesting she’s about to reduce the cash isa allowance significantly, allegedly hoping to encourage S&S isas.

This really pisses me off tbh. I won’t be putting money in S&S.

@nahthatsnotformeMoney Market funds are a low risk investment which can return around the same (after fees) as you get from interest from a bank. For example https://www.vanguardinvestor.co.uk/investments/vanguard-sterling-short-term-money-market-fund-investor-gbp-income-shares/overview shows a return over the last year of a bit over 5%, with fees around 0.27%.
It is not guaranteed return like bank interest. It goes up and down like variable rate bank interest.

Most FTB's saving for a house deposit wont be putting 20k a year into an ISA... and probably not a fixed term one either, where the best rates are to be found.

They also wont be holding substantial amounts in them & not for long, by substantial, i mean 100k plus...

Longer term saving? better returns elsewhere.

This whole thing scares the shit out of me. I have no financial education and am terrified of the whole idea. The only message I have got is use ISAS if you have any spare cash, because they are safe.

I need to try to save so I can be as financially independent as possible because my marriage is very difficult. I don’t know what the future looks like. I can’t save now because DC have additional needs and the state will not pay to meet needs so we have to. I’m just so anxious that I will make a financial mistake and end up in poverty. No inheritances coming my way or his way. The government doesn’t understand how psychologically when you place all your hopes on savings and have been told it’s the right thing to do that a lot of us will be totally spooked and start keeping cash under the bed or something more risky because if saving at banks feel unsafe then we’re not suddenly going to become educated investor whizzes. It’s totally unrealistic.

Yes, the uninvested cash in my S&S ISA earns 4.35% interest (through a mix of bank holdings and qualifying MMFs). Zero fees. This compares with interest of 4.1% on the cash ISA on the same platform.

Depends how old you are when you retire I think. I retired after working for 32 years; it’s entirely possible I’ll be retired for more years than I worked, and so remaining invested in equities is essential IMO. Otherwise I’m missing out on far too much growth to be prudent. Sure, I’ve got some cash or cash equivalents, but only enough to cover 3 or so years spending, so that I can ride out most downturns in markets if necessary.

I hear you. I really do. But for me, and I appreciate this thinking is potentially limiting, I have my pot, I know what's in it, and it can only increase. Despite that increase being (likely) less than in S and S, I know where I am. That sense of safety brings me comfort.

Then this is what I'll probably do going forward
🙂

It’s not free. Also, I pay enough tax so any opportunity I get to legally avoid paying anymore then I gladly take.

I see in a story in today’s Times she’s planning more tax increases, alongside the cash ISA limit.

@MightyDandelionEsq there’s some very greedy traders licking their chops right now with the hope to get their fees up from people panic investing.

I was rereading the thread earlier and this jumped out as a very valid comment. I worked in pensions in the late eighties/nineties and remember the massive shitshow caused by greedy and/or incompetent FAs giving bad advice to workers to opt out of very good pension schemes, transfer benefits to private schemes that were less beneficial etc. I wonder what protections will be in place to ensure sound advice, monitor fees etc for those who might feel pushed towards S&S ISAs by the government.

Oh bloody hell, so is that how the government are hoping to attract the financial services sector to stay in the post Brexit UK then- carte blanche to give shit deals to future pensioners..?! This is just looking worse and worse

I still don’t feel I have a better voting option than Labour though. I will never trust the Tories (or Reform obviously). Jeremy Corbyn can piss off with whatever his new nonsense is. What are normal voting people supposed to do? I just want some centrist grown ups that I can trust on the economy and public services to vote for.

I’m emptying my Sipp into both a cash ISA and S+S ISA over the next 6 years
Precisely to avoid paying any tax on the income, ever.

Why wouldn’t I use my available personal allowance to do so?
They’ve made it so everyone who gets a full State pension will use their full PA.

Do you think low/no earners shouldn’t have the Starter Savings allowance either?

I’ve read that they might make it so you CANT hold cash or MMFs / cash like funds in S+S ISAs, which will be extremely annoying.

I agree with most of this, except I have never or would never trust Labour

According to the BBC her plans are ‘on hold’. Which I assume means someone has pointed out how this plan needs binning/uturning along with the rest.

Thank goodness for that. (Labour voter here)

That's good news if true. Just read the BBC report on it. I did see a video on Youtube by Martin Lewis the other day who didn't think they'd be reduced to £4k anyway (not sure where that figure came from) but he thought £10-15k. If they keep it at £20k I'll be really happy.

She’ll be planning something else, probably an increase in income tax.

That's good news, and fingers crossed the current ISA rules don't change for the worse. I'm not sure she and Labour in general could risk more criticism at the moment!

I suspect it’s on hold because it affects pensioners and those on lower incomes as they are more likely to pay safe with their money. They will be looking to come after that easy target - the middle classes who are in paye, kids and a mortgage. Very difficult for them to avoid tax cliffs, not getting any benefits.

Personally I get a bit fed up with "could be" news, adversely affects the markets, makes people panic. Think the last one was about pension pots and loads of people cashed in their pensions in a panic and the change didn't happen and they all lost money.

The larger building societies have got together and pointed out that if their cash deposits are reduced there will be significantly less mortgage lending available which would then negatively affect the housing market. And what’s the point in building 1.5M new homes if many fewer people can get a mortgage?

It looks like finally she actually listened to some affected parties instead of just railroading her ideas through. Now she should backtrack on pension inheritance tax.

This typifies the Labour party right now and their policies. They seem to be incapable of working through to the logical consequences of their half-baked fiscal policies. Time and time again. It's embarrassing really.

Totally agree. They make a collective decision and then back track once it encounters problems

I think its important to change your mind if the decision is bad.....but the government is doing that EVERY TIME

Smacks of weakness and people pleasing

No it smacks of rushing things, which is not great, but in leadership it’s never weak to change your mind because you’ve listened to the people affected. What would you rather, they plough on regardless?! They’re not dictators.

I think she has been influenced by fund managers who obviously want people ti switch from cash isas as they make their money handling our cash. However, the money saved in cash isas doesn't just sit in a bank vault, it is used by the banks to lend out on mortgages and loans. The we got our first mortgage, back in the 70s, the high inflation reduced the amount of cash people could save which led to rationing of mortgages, so you had to meet strict criteria to get a mortgage, and wait for months, which snarled up the housing market. There were obviously lots of other factors. The problem is, tinkering with the limits could lead to unintended consequences.