How are cash ISAs pointless?
Best savings account?
- Thread starter Merlin5
- Start date
Your money is not safe in an MMF the way it is protected in a Cash ISA. Significant difference.
Exactly, the rate cannot go as high as it has traditionally been because the entire housing market would collapse. I have no idea what the percentage of people who would lose their homes would be if rates jumped to 10% but I imagine it would be a huge number. The people who would survive would be those with tiny mortgages vs their salaries, those who don't have a mortgage and those that could shift stuff around to deaden the blow. Everyone else would be ******. Millions and millions of people would lose their homes if it lasted for any real amount of time.
Soldato
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- 10 Oct 2006
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I bet they will have this covered when they drop the cash isa limits and have a policy that blocks it or makes the interest taxable.
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The entire economy would collapse with the amount of money that would be lost to servicing the mortgage debt. We could probably afford a 10% mortgage rate but literally all other spending would stop except utility bills. Holidays, eating out, cars, hobbies would all stop overnight.
The government need to be very very careful if they decide to kill savings vehicles that are largely used by the less wealthy. I cannot see how they can justify killing the ISA limits without a huge number of people just checking out of financial planning. It won't generate any more money and people will look more and more towards spending now and thinking "**** the future".
For many people, £20k/year is something they will never use. For those that do use it though, you aren't talking the wealthy part of society, you are talking the middle class (whats left of it). You have to incentivise saving and planning for the future as a government or it will come back to bite you in the arse massively.
For many people, £20k/year is something they will never use. For those that do use it though, you aren't talking the wealthy part of society, you are talking the middle class (whats left of it). You have to incentivise saving and planning for the future as a government or it will come back to bite you in the arse massively.
Soldato
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- 13 Sep 2005
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I really don't get this push. Wasn't their thinking that by capping the cash ISA limit that suddenly people will not only invest into the stock market, but specifically the UK market? It all seems very ill thought out.
You are right, the city of London and the LSE are gradually losing favour and this has been sighted as a partial justification for the cash ISA caps. Trouble is, as you say, in the connected world where every man and his dog can pull out his mobile and invest in pretty much any market in the world, why would capping cash ISAs mean people would suddenly choose to invest in the FTSE ?
I think its possibly just another cash grab from the middle classes, the treasury need more coming in and the rich are too mobile to snare. Capping cash ISA's means people who value the security of cash savings will leave the rest of the money in "normal" savings accounts and pay tax on the interest earned over their tax free allowance.
I think its possibly just another cash grab from the middle classes, the treasury need more coming in and the rich are too mobile to snare. Capping cash ISA's means people who value the security of cash savings will leave the rest of the money in "normal" savings accounts and pay tax on the interest earned over their tax free allowance.
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Doubt it. Most UK MMFs are into Uk treasury bills, aka short term UK debt. The gov wont want to rock that market.
It's all just rumours at this point.
The uk market thing has come off the back in an idea they tabled a while back.
That idea was they would give people an extra 5k isa allowance, taking it to 25k in total.
The caviat was that extra five grand could only be invested in UK stocks and shares.
That idea fell flat on its face for reasons I can't be bothered to go into.
The rumour now is they may reduce the amount of your 20k allowance for cash ISAs, to push people to utilise stocks and shares ISA more.
So for example they might cap cash isa allowance to say 5k per year, meaning if you want to utilise the full 20k allowance you'd have to put additional money (up to 15k per year into stocks and shares ISAs.
It's all just rumours at the moment though.. The autumn budget is what to watch.
And if the government does do that, they can't do it retrospectively, so it won't come into force until April 2026 at the absolute earliest.
If the rumours are correct and you're not restricted to only investing in UK stocks/ETFs, it's arguably not a bad thing as ETFs within a stocks and shares ISA wrapper generally return more than cash ISAs.
But what it does do is take away consumer choice.
If you are incredibly risk adverse and are happy with 4% or whatever in a cash ISA then you should be able to make that choice as an individual.
News flash... If you can afford to pay into and isa after mortgage/rent and all other costs of living, you *are* the middle class.
Edit.. Also the treasury has nothing to directly gain... You don't pay tax on ISAs!
The idea is, it results in more people investing in UK business, which means more UK business growth which benefits the wider UK economy in more general terms.
That indirectly benefits the treasury, as uk business doing better means the business pays more tax as they are making more money, and theoretically creating more jobs as they grow, etc.
It's not a terrible idea on the surface, depending on if, or how it's implemented.
The devil will be in the detail as always.
It's quite correct to assume that some people will simply not invest in stocks and shares ISAs full stop because 'too risky' or whatever.
Is suspect the government will either do nothing, or simply say you can't put 20k per year into cash ISAs, they may limit it to '£x' per year to push people into stocks and shares.
I'd be incredibly supprised if they forced individuals to only invest in UK stocks though. That would be insanity on a number of levels..
Investing in a UK ETF for example, is a lot more risky than an all world ETF so people might not bother at all, which would achieve the polar opposite of encouraging more people to invest.
Give this a watch of you want to give yourself nightmares lol,
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How is someone who's only just managed to pop £10/month into a cash ISA middle class?
Tell me you know nothing about economics without explicitly telling me you know nothing, lol!
There's no such thing as the middle class anymore.
Firstly, there's the poor. They are buggered.
These are people who own no assets and worry about the gas and electricity bills.
Then there's the 'working class' who might be able to save a few hundred quid a month whilst juggling that with a mortgage, and possibly a few kids and all the expense that comes with that.
They probably have a mortgage and probably credit card debt and are probably driving a car they can't really afford to 'keep the image up'.
Then you have the rich. They make more money in passive income per month than you do actually working 40+ hours per week.
There's really no such thing as 'the middle class' anymore since the 'boomer' generation.
Watch some of those 'Gary's economics' videos.. He comes across very blunt, almost condescending IMO, but he is an incredibly successful trader, so a blunt, no BS attitude kind of comes with the territory.
Just for clarity, I didn't say you pay tax on ISA's, but simply pointed out a way capping cash ISA allowances could benefit the treasury directly.
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Fair enough, I misinterpreted your comment a little bit.
It could benefit the treasury by encouraging people to spend cash instead of saving.. But that's not going to work long term, not even a little bit.
It makes no economic sense for the country to have individuals living paycheck to paycheck and shy away from saving and/or investing, or staring a business or whatever.
Because once an individual runs out of money... They spend a lot less and they don't invest at all.
I literally quoted you, who said that anyone paying into an ISA was middle class.
Whatever man, you're misinterpreting... You do you.
Good luck out there, you'll need it.
Interestingly, it looks like the planned cash ISA changes may now be placed on hold citing what I thought would be the stumbling of building socialites kicking off around liquidity for mortgage provisions.
www.theguardian.com
www.bbc.co.uk
So much for her big Mansion House speech. Likely another damp squib incoming!
Cash Isas: Rachel Reeves pauses plans to reduce amount savers can put in
Chancellor, who had been expected to announce changes next week, faced backlash over move
www.theguardian.com
Cash Isas: Plans to cut tax-free allowance on hold after backlash
There had been reports in recent weeks that the chancellor was going to cut the £20,000 limit.
www.bbc.co.uk
So much for her big Mansion House speech. Likely another damp squib incoming!
It was always a bit sketchy... I mean stocks and shares ISAs do generally offer better returns over cash ISAs, or any normal savings account *IF* you invest in 'safe ETFs' or whatever.
But with a stocks and shares ISA, there's nothing stopping your average joe bloggs putting the whole £20k on one random company, that they read on ticktock is the 'next best thing' and...
The thing is, forcing people into stocks and shares is also forcing them to take on more risk as an individual, which, money aside, I think is moraly incorrect, especially given the generaly high level of financial illiteracy in the UK.
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