For those of us in the UK, it looks like storing cash in the Stocks and Shares ISA is not going to be an option any longer as it will now attract a charge when the rules change.
Does seem a little unfair I think.
On Cash ISAs
Cash ISAs are a safe way for people who do not want to take risks to keep their money earning tax free, to reduce it by such a large amount seems short sighted, most people will not suddenly now start investing as they do not want the risk, the cash will be removed from the eco system and people will just leave it in non interest earning accounts.
Regarding stocks and shares ISA and holding cash inside is if I have a dividend paying stock inside my ISA it will pay me that dividend then would I have to remove that cash myself straight away from the ISA? Micro managing all dividend payments into the ISA? Not sure how that would work. Thank goodness itās a while away this rule.
Re: cash ISA, yeah small change and wonāt encourage investment I think but not really impacting much so no big deal
It would be incredibly difficult for everyone to monitor their dividends and transfer any payments out straight away to avoid this proposed extra charge. Also, what happens when I deposit money waiting for a stock to hit a certain price before I buy, it could be sitting there for days, does that attract a surcharge?
As for āit doesnāt impact me muchā there are many 1000s who it does effect. So itās not all about you.
I mean yes people use cash ISA but the restriction to 8k will only affect a small portion of the population who put over 8k into a cash ISA so that is why I said it was not much impact in general.
Itās all a bad idea in my opinion, and I would be very surprised if it encourages higher investment participation by savers. The boss of broker AJ Bell has publicly slammed the changes as well, and I have to say I agree with him - AJ Bell boss: Rachel Reeves ISA reforms ādoomed to failā
Yes it seems to be reversing the 2014 ISA rule changes which aimed to simplify the system, and also creates a ātwo tierā system (under and over 65ās) which will add costs and complexity for providers to administer. Another kick in the guts is the proposed restriction on ācash like investmentsā in S&S ISAās. If you want to park your money somewhere relatively safe which isnāt cash, under the current rules you can buy a short dated bond ETF or similar, and while there is a risk of loss, they donāt have the same risk as equities, and might make a bit more than cash. These sort of investments are potentially going to be barred, although how it will look in the end is not known yet, as they are supposedly consulting on this.