You’ve been crying out for a UK ISA, right? I mean, even the investing platforms said they didn’t want one but somebody must have asked for it.
Perhaps it was you?
Well, you and Chancellor Jeremy Hunt, who presumably wanted another bone to throw to the electorate.
And so the Dad’s Army ISA has marched on the parade ground.
Or rather it’s marched into a consultation phase.
The basic idea is clear enough. We’ll get an extra £5,000 annual ISA allowance to invest in UK-listed companies.
And – thankfully – the existing £20,000 annual ISA allowance remains unmolested.
But beyond that there are lots of questions. The consultation will run until 6 June 2024, and we won’t get specifics until well after that.
I wouldn’t expect the fine print to be written – and the platforms to be ready to implement the UK ISA – until the Autumn Statement at the earliest. Perhaps not even until April 2025.
You’ll just have to wait to fill your boots with M&S and Tesco shares while playing Land of Hope and Glory on the gramophone.
Fool Britannia
The UK ISA consultation is specifically not asking whether a UK-restricted ISA vehicle is a good idea, stating:
This consultation does not ask for views on the principle of introducing a UK ISA or alternative options for achieving the policy objectives.
No surprise there. The Dad’s Army ISA UK ISA is a political bauble, not a serious bit of legislation.
You and I may believe that UK equity markets are in a funk because the country has been in political tumult for the best part of a decade, Brexit damaged our terms of trade and is costing £100bn a year in GDP, the UK economy is stagnant, and foreign investors have stepped back from buying UK shares accordingly.
We also know it’s the resultant de-rating of UK shares – made even cheaper by a weaker pound – that’s driven the rash of UK takeovers by foreign companies.
But the Government – supposedly – believes that UK equities languish because the average Joe Bloggs has £5,000 lying around that they would just love to invest in British companies inside a tax wrapper, if only they hadn’t filled their existing £20,000 annual allowance with, I don’t know, a global tracker fund?
Never mind that only 15% of ISA savers use their full allowance anyway.
Non-party political broadcast
The idea that the UK ISA is designed to meet an investor need – or even the needs of the London stock market – is absurd.
It’s a political bung in a post-Brexit Britain where slapping the Union Jack onto things is about the only tangible ‘positive’ outcome from leaving the EU.
However such clear-eyed cynicism doesn’t mean we shouldn’t use it to improve our investing returns.
British bonds for a British ISA
Politics aside, my main concern with the UK ISA is it enshrines home bias and could distort behaviour for no good reason.
Particularly so when it comes to passive investing, which should be into global equities and domestic bond funds.
However on reading the consultation paper, the intention is currently to allow the new wrapper to hold gilts (UK government bonds) and UK corporate bonds.
If this makes it into the final UK ISA legislation, then passive investors should simply be able to put their UK ISA allowance towards their bond allocation.
That bond allocation would usually be UK bond funds anyway.
Like this, we’ll get an extra £5,000 a year of tax-free wrapper to build up the 40 in a 60/40 portfolio.
Of course doing so won’t help UK equities re-rate.
But as I’ve said that’s not happening on the back of the UK ISA, and it’s not really the point anyway.
None of your funny foreign shares
What about equities?
The devil will be in the detail and the consultation doc acknowledges there’s a lot of ways things could go. It looks back to the previous PEP1 era, which constrained investment to UK-listed companies, noting:
This approach would enable the UK ISA to support a range of UK companies, from small companies trading on AIM, to medium or large UK companies that are listed on the London Stock Exchange. It could also support UK companies across a range of sectors such as construction, healthcare and technology.
This approach also means that it would be easy for investors and ISA managers to identify eligible companies. However, it would not take into account the proportion of the listed group’s commercial activities conducted in the UK, as defined for example by source of revenue or location of assets.
The alternative approach – maintaining a list of ‘permitted’ companies – wouldn’t be hard to create. At least not with the resources of a government.
Such a list might be based on sources of revenue or where the workforce is located (UK or abroad) or where a company pays its taxes. Or any number of other things.
No, the difficulty would be keeping that list up-to-date on an ongoing basis.
Moreover, presumably the aim of the UK ISA is not to see an ambitious UK company that acquires an overseas rival suddenly made an ineligible holding.
How will that – and countless other similar issues – work out?
The same questions arise with funds and investment trusts, which are also intended to be allowed in a UK ISA.
If Apple shares fall and a mostly UK fund manager wants to buy them, will they be dissuaded from doing so because they stand to be booted out of the nation’s Dad’s Army ISAs? Will there be a grace period?
It’s all a finickety nonsense – but I suppose you know my view by now.
UK ISA operating instructions
Talking of which, I know what you’re thinking…
What about ISA transfers? Or investing in two UK ISAs in the same tax year? Can you turn your UK ISA into a cash ISA? Who will police all this?
To be fair the consultation paper raises all these questions and more. For now the answer is again we’ll have to wait until it’s finished before we know the rules.
To me this laundry list once more highlights that the UK ISA is a dumb complication everybody could do without.
It’s silly and it’s not investing related. End of.
And before the usual suspects accuse me of running Britain down – like I apparently do when I bemoan our leaving the EU for hurting the UK economy (go figure) – then au contraire, my jingoistic chums.
I too lament the state of the UK stock market – and the City generally.
I cut my teeth investing in UK-listed companies. Even today my (very actively managed) portfolio tends to hold an order of magnitude more UK stocks than a global tracker does.
However I’m very sure the UK ISA won’t meaningfully help with anything that truly ails the UK market.
Better for Blighty
What would, you ask?
Sadly we can’t undo the foolish decisions of the past. At least not for a while anyway.
But there were other helpful actions that Hunt could have taken.
The government shouldn’t have raised UK corporation tax, for starters, and preferably further cut it.
I would also have abolished stamp duty on LSE share dealing. It’s a pernicious cost of putting money into UK shares – and meaningfully so for the big international money that could actually drive a re-rating.
But as I’ve repeatedly said, the UK ISA has very little to do with the investing needs of us, nor even the wider environment for UK stocks.
It’s all about enabling Barry Blimp to put £5,000 into Rolls shares in a specially-designated UK ISA and then to boast about it at the golf club.
Indeed given it’s only really about politics and optics, I suspect the government will eventually allow any old UK-listed company to be held in a UK ISA.
At least that will save on compliance costs and paperwork.
How to use your UK ISA allowance
To be clear, those of us who can use this extra allowance should absolutely do so. On a personal level, we should take all the tax mitigation measures we can get.
For passive investors, at this stage this looks like holding some of your UK government bonds in your UK ISA.
For active investors, we can hopefully rejig where we hold our stock picks and fund purchases to meet the UK ISA requirements.
Of course I welcome the de facto rise in the annual ISA allowance to £25,000. It’s been frozen for years.
But it’s a shame it’s being lifted via this dopey vehicle.
It’s all good news for Monevator though. More complications means more confused people coming to our site asking “WTF?”
But I’ll leave it to other media outlets to hang out the bunting.
Want to comment on the UK ISA consultation paper? You’ll find it on the government website.
- Personal Equity Plan [↩]
Will it happen? After 3 months consultation, time for gov discussions, legislation to pass… all before an election? Nah. It’s all a game.
I’ll be surprised if providers bother to respond.
I don’t really see the need for the complaining. I’ll carry on putting my 20k into the global tracker funds or whatever, but an additional 5k into the FTSE All-Share to grow tax free with tax free dividends suits me fine. If you don’t want to use it you don’t have to.
Should be “hang out the bunting” not punting, although I like the image 🙂
It’s another 5k a year tax free investment ,assuming it survives the upcoming Tory electoral annihilation. Bed and ISA some gilts or a FTSE 100 tracker. Yes it’s more complicated nonsense to add to the tax system, but apart from that, what’s not to like?
Barry
Does the consultation suggest a UK index tracker won’t be eligible? That seems the implication for you suggesting passive investors will need to use it for gilts.
Surely if only individual shares are permitted it’s encouraging inappropriate levels of risk for most retail investors…
Obviously, it only benefits rich folk. But I for one would rather the government actually did something about our failing public realm.
@Jiffy — Oops, you’re quite right. How annoying, I gave it 60 minutes to see if any typos arrived before sending the email — too late!
@Mike — As I said on Twitter there’s nothing not to like personally, and I’ll certainly be using it. If they cut income tax to 0% that’d benefit me too, but I wouldn’t be lauding it as a well-considered policy.
@Adam — I am guessing you haven’t written a blog for 17 years explaining why the average investor should invest in global stocks and not be obsessed with home bias. Or explaining the intricacies of the already complicated ISA system, for that matter. Yes, for the likes of you and me it’s all gravy though. 🙂
@KISS — You could be right!
The consultation paper suggests UK equity trackers will be eligible.
I am saying use the Brit ISA for gilts as a passive investor because you will in 99% of case have a UK government bond fund. So it doesn’t change your investing posture at all, just adds a new extra wrapper.
Most passive investors should be in global equity funds not UK trackers these days.
But yes if they have a UK tracker then they could store that in the Brit ISA too. 🙂
Thanks for the post.
I will stick with my global tracker for my normal ISA.
That I can put some of my gilts into the new British ISA is worth knowing. (Although I own the very low yielding ones, so don’t pay a huge amount on them unsheltered anyway.)
With respect @TI, feel like you’re overcooking the politics a bit. Ultimately its a new tool for retail investors to use which can only be good for the Monevator readership. If it smells a bit Brexity just hold the nose before jumping into some tax free bonds.
Regular ISA increase would have been optimal but will take a Dad’s Army pot over nothing.
Doesn’t impose any home bias, letting tax wrappers influence asset allocation is a choice.
On 2.7 in the consultation paper, making funds/trusts eligible if they hold over 75% UK companies. I wonder how many providers will bother to launch products with the necessary restriction if that becomes the rule.
Agree best use of it looks to be GBP bonds albeit much still to be determined it seems.
I suspect all monevatorists have token home market holdings (CTY for me) which can simply be bed and isaed across. If it’s no funds we will just have to improvise.
I was keen to look up details about this earlier. Then I thought “stop wasting your time and wait for the Monevator article.”
Hey presto, and much sooner than I thought. Thanks!
Whilst anything interesting was trailed in advance (a bit like being told what your present is just before unwrapping it) the inflation figures were noteworthy – not showing the same last 1% stickiness to get to target, like possibly in the US. Even seen some commentary from those much wiser than I suggesting deflation as a possibility.
Points to lower interest costs, lower overall £ govt borrowing and therefore more room for a future govt to spend – with less worry about the inflation impact. Could be happy times for Labour. For us, happier times for UK gilt prices in the short term?
@Aol — Hi! You write:
Yes, that’s what I’ve written above, no?
I have to comment on the politics/policy/motivation though.
If I wanted to just write How To instructionals then I’d work for a bank and turn out bank bumph, and those that wanted that would choose to read such too. 🙂
Holding gilts in the UISA (BISA?) and global index funds in S&S ISA?
Or, holding UK index funds in the UISA and ex-UK index funds in the S&S ISA?
No matter which one you choose, good luck with rebalancing when there’s a large market movement.
I don’t have the money to use the full £5,000 new ISA allowance, and due to the additional complexity in asset allocation, rebalancing and other admin work, it simply isn’t worth it.
Of the 67 million people in the UK, only 12 million people subscribes to an ISA each year, of which only 15% uses the full allowance. That makes it 2.7% of the population. Extra £5,000 ISA allowance for the top 2.7% super rich people, well done!
”I have to comment on the politics/policy/motivation though.”
Err.. no, you really don’t. And it’s getting very stale and to the detriment of the site.
I read moneyvator for your excellent financial content. I hold my nose through your ranting on the politics around leaving the EU.
@petejh — Each to their own, don’t read the site then. 🙂
Is the ISA rule change announced in the last Autumn statement still a goer ?
The change being that as from 1st April 2024, it will be OK to pay in to multiple ISA’s of each type in a financial year . To a total of the existing £20,000 limit.
Hard to disagree with anything in the article – ie I agree strongly!
I think what might concern the average monevator reader is ISA’s becoming a political football. What’s to stop the next government flipping it round. So 20k BISA, 5k global tracker – or a variation thereof. In the name of back Britain. Once the product is set up it’s not hard to adjust the limits. Who cares if sensible monevator readers complain. We are the slim minority. Can’t do anything about it though so why bother being concerned I guess.
I too wonder if it will survive the upcoming election. Budget also pretty slim on growth, energy self sufficiency, education, productivity, the sort of stuff that might actually boost growth medium term…who am I kidding!
Another utterly pointless and unnecessary ISA arrives to add to all the others. Honestly, given that only 50% of ISA subscriptions even go into stocks or bonds and only a minority can even fill their current £20k allowance, then subscriptions to the Brexit ISA are going to lucky to even hit £5bn/annum tops.
The reality will be far less. We’ll all sell some Global tracker, put £5k in the Brexit ISA and the rest goes straight into a Global tracker ex UK. Net investment in the UK: zero. That’s really going to shake things up.
@Alex I belong in the super rich 2.7%, using my full ISA subscription annually. I manage to do this based on my super rich salary of 60k, after annual rent of about 10k as I don’t own any property.
The above without even factoring tax, pension contributions, council tax and VAT.
The fact that people like you classify me as super rich, is a good root cause example of the direction this country is taking, and why the tax burden on society’s productive members is the highest since WWII.
I don’t hold any bonds as I follow Ermine’s rationale about DB pensions.
For people in this situation the devil is really going to be in the details of what you can hold, as I don’t really want to have to fiddle around with World ex UK in the rest of my ISA to keep the allocation straight.
@all — I do get the politics is annoying. Unfortunately, as others have said here, this is a politicised investment vehicle. Presumably that’s less unwelcome if it suits your politics, but there you go.
Let’s remember why this is necessary, as I just shared on Twitter:
Brexit has de-rated UK equities. (Follow the links in my article if you’re confused about this).
Hence the Government is trying to address this with various reforms (Mansion House etc)
Brit ISA is supposedly part of addressing the de-rating too. It will achieve nothing material, but sounds good to Brexit-y voters.
Hope this helps 🙂
I would love Brexit not to be a weeping wound dripping GDP (at least £100bn a year) and animal spirits from the UK year after year. Unfortunately it is, so I’m not going to just forget about it when it’s relevant to a subject.
@petejh, agreed, its just so sad to see this blog wasted with his rants.
Imagine how sad it must be to feel miserable and rant every weekend.
@BBbetter — I’m far from miserable. I’m perfectly happy, partly by being rich enough to shrug off the impact of your economically and political enfeebling Brexit. However I do not forget those less fortunate than myself.
Imagine voting for Brexit, seeing it deliver no benefits and huge costs.
Imagine seeing the Government specifically bringing in a British ISA as part of an attempt to reverse the resultant enfeebling of the UK stock market.
Then imagine complaining that somebody mentions what’s going on when it happens.
Clue: If Brexit had been a big success, the pound was soaring, we’d seen economic benefits instead of economic demerits, and global investors were flocking to London, then we wouldn’t require a Dad’s Army ISA.
Never mind though, you got your blue passport eh?
@Investor
Imagine never saying a peep about Brexit before the referendum for fear of alienating a chunk of audience and then repainting yourself as an ardent Europhile after it was lost, that would be truly pointless
Ah, now @Neverland has chipped in.
That’s Bingo! What do I win?
“Each to their own, don’t read the site then.”
Fair enough, you’ve convinced me. Goodbye then.
PS. Before you try to label me as a Brexit supporter, I’m an Australian living in Germany. I have no opinion either way about Brexit, but I have finally had enough of seemingly every article being about it.
@Dave — That’s a shame, sorry to see you go.
Obviously I would dispute “seemingly every article being about it” to say the least (maybe “every third article including a mention” I could agree to) but I understand one tends to get allergic to such things once they’re noticed.
All the best, cheers for sticking it out for as long as you could.
You could negate the home bias somewhat by buying ex-uk funds in the 20k isa/ in existing isa money. Some hastle rebalancing to keep it unbiased, but could work, that way we could scupper his intention & don’t let the tax tail wag the dog
Dave’s got a point here folks. I know there’s no editor, but the pointless harping on about Brexit is distracting from the core personal finance message and otherwise excellent information here. I would encourage a bit of Editorial discipline… As hard as that is when you want to express yourself.
@ The Investor
“(maybe “every third article including a mention” I could agree to)”
Perhaps try to read the room and take on board that a significant fraction of your readership, whatever their political persuasion, are by now finding your fixation on this issue rather boring and repetitive.
@Baron — To be honest it doesn’t even seem 50/50, going on the comments here. A couple of people unsubscribed on reading the email, which is actually lower than usual.
What I see is (with the exception of Dave) the same few people complaining. Often these people never comment on anything else. Same on Twitter.
Of course I fully accept the site’s nakedly anti-Brexit stance has probably reduced the Leave-minded readership over the prior years.
Again, the Government has introduced a UK ISA specifically to address a weakness in the UK stock market (they say this themselves) which pretty much everyone agrees is a post-Brexit de-rating. (One can argue if it’s a valid de-rating or not).
So it’s kind of ironic arguing this one. The politics is completely germane.
As I say, use the allowance if you can. I will.
But I’m not going to overlook why they’re doing it.
@ TI
“The politics is completely germane”
Really? Germane to how one should best take advantage of this new ISA should it ever come to pass?
I imagine that question is what brings the majority of your readers to the article. Having to glean the, as always, excellent financial discussion of the subject from the redundant political editorialising is somewhat tiresome. But your site, your rules.
I feel like a global equity fund will give better returns in a GIA, even after paying income tax on dividends and CGT on maturity, than UK focused equity fund will do in a tax-free ISA.
As always The Investor gets to the heart of things – the value here will be gilts and bonds (if allowed, and only if rates remain relatively high).
Government policy and decision making processes are in need of huge reform. I find it somewhat ironic that the classic “efficiency savings” that are always spoken about by government don’t seem to apply to them, one of the longest standing institutions locked in historical constructs and a mess of process and procedures that is not ever up for real change.
Case in point: The entire tax system needs reform from scratch, not constant fiddling and using future assumed forecasts as the basis to claim success. In few other areas of work do you get over a decade of mediocre-ok outcome based performance and get away with using forecasts of the impacts of your decisions made today, over the next 5 years (with most the assumed success coming near the end of the next 5 years), to justify your continued fitness for the role.
The only things that really matter are total money going to the state, where it comes from, and what they choose to fund from such money. The current mess of NI, Income Tax, the various thresholds, step changes in rates, allowances and their interactions with rates, legal ways to avoid tax brackets, tax wrappers etc etc – it is just a big mess. Smarter people than me could solve this if they wanted to, and people on this blog, including me, would be the likely losers, but let us not pretend that the tax system is efficient and not open to easy, legal gaming that mostly benefits the people wealthy and smart enough to navigate the system.
Further, as someone living in Scotland I just sigh about all the constant fiddling, much of which does not apply in Scotland as intended by UK ministers delivering the details, we get further fiddling by MSPs before we properly understand the impacts. What we end up with is a mess that reflects the broken UK tax constraints/system that is then modified (I prefer “played with”) to suit Scottish differences and needs, leaving something in Scotland that no one is really happy about or even understands why we ended up where we did – as it’s the messy English/UK central system with the Scottish overlay/fiddling on top. An organisation seriously banging on about efficiency savings as much as the current government do should have sorted their own house out first, and simplified, streamlined, or made the mythical “efficiency savings” with the tax system (The Scottish follow up is a much harder problem, I understand). This leads to the situation we are in where instead of designing or fixing the system, we are tinkering with an inefficient outdated tool that satisfies no one and is not fit for the world we now live in.
As I am in Scotland, the conservative party is a wasted vote currently, so I am not even trying to make a point about any particular party, the elections coming, or even this budget – just asking people to step back a bit and consider the irony of pushing for efficiency savings and such when the system they are using to deliver it, and the structures of government are getting more complicated as bits are tacked on and exemptions added. A cynic might suggest this level of obfuscation and lack of transparancy in what is going on in the tax system is by design.
I don’t care for wider politics much, brexit was probably a mistake, not because of the perceived/actual financial consequences, but because the vast majority of people in the UK (certainly in Scotland), were not screaming for a referendum on leaving the EU as their immediate priority, it only happened because of political game playing. That referendum should never have happened simply because the country and people living in it had/have dozens and dozens of more pressing priorities to worry about before that should ever have been the place our collective brainpower was allocated. Brexit may or may not be universally accepted as a success or failure at some point in the future but many clever people are still diverting mental resources to it today when other areas are perhaps more deserving than the “what ifs” that brexit chat leads to. No disrespect to anyone on this blog or the authors intended – I just skip over brexit chat – I will pick up interest if a new vote ever seriously looks to be on the table in the future.
Investor, I think you’re missing the point – people are complaining about the tone, not necessarily the content.
Talk about brexit all you like (even you have boredom threshold with it).
But as Vic Mackey notes, you’d be wise to use some editorial intelligence and keeping the tone non-ranty.
Your site, your rules. If you want a party political broadcast I’ll for sure turn off, you’re not indispensable.
I’ll break my long-term lurking streak for the first time as even TI’s saint-like patience seems to have been tested by some of the comments here. I really appreciated this post coming out so quickly to give your perspective on the details of the scheme and the political background. It seems a bizarre view from some commenters to expect no political context in a blog post about the Chancellor’s Budget (in an election year) and his new scheme that seemingly has no chance of achieving it aims.
An interesting and nuanced analysis
https://www.rathbones.com/knowledge-and-insight/investment-update-non-patriotic-case-uk-equities
It admits the B word is part of the reason for a UK equities discount, but given that >80% of UK listed companies revenues are generated outside the UK, it’s not the only reason for the long funk. That the market is stuffed with old economy companies rather than tech darlings is a factor, as is UK regulation.
It’s sort of a highbrow finance-related culture war policy isn’t it? The kind Hunt himself probably rolled his eyes at in private. An intentional controversy already paying minor dividends in the comment section of this article (with all respect to the participants) and many like it.
“Are you a firebreathing jingoistic Englishman? Or are you a moany gloomster who enjoys talking down our great country? If so then head over to your nearest internet and start an argument about the brand new maybe-it’ll-happen UK ISA! Never used an ISA and don’t have money to put in one? Don’t fret – there is no need to have a personal interest in this issue in order to form strongly held opinions about it, and potentially let it influence your vote.
“Mrs Brierley already uses her full 20k allowance to invest in British companies and can’t wait to do a bit more to invigorate our proud economy. ‘Oh I was delighted to hear Mr Hunt’s announcement. I got straight on to my lovely financial advisor James and we spent a whole hour chatting’. She suspects her neighbours invest in foreign stocks because they own a Tesla. Yuck!
“However those mainstream media types at the woke FT don’t like the idea of a UK ISA with Louis Ashworth calling it ‘meaningless’. At investment platform AJ Bell – whose board of directors includes Irishwoman Evelyn Bourke, and possibly but not necessarily any other non-Brits – CEO Michael Summersgill used the word ‘error’ to discuss the British ISA, and head of policy retirement (or something) Tom Selby called it ‘daft’ in a rabid Twitter post that received over 30 likes.
“Well, we know who to blame for the state of our economy don’t we! Those who invented this pointless policy or those who talk it down – it’s got to be one or the other, pick your side!
Okay I got a bit carried away. Mainly I enjoy how rebellious the thought of putting one of those ‘Global excluding-UK’ funds in a main ISA to balance the BISA feels.
Aw, c’mon, don’t be such a miserable git. Change the framing – plans for a 25% increase in ISA allowance? Bring it on. Sure, it’s perhaps not for pure passivistas but the application of a little bit of mind ought to turn up a few reasonably diversified investment trusts that fit the bill while being more outward looking in the underlying assets. The LSE is stuffed with potential candidates.
My existing ISA probably has enough of these guys to kick out into a GB ISA for a good few years yet, and the vacuum could be filled by VWRL or some other fancy.
Great British ISA? I look forward to it! Sure, a straight 25% uplift would have been nicer, but given this lot’s addiction to keeping thresholds frozen in the face of rampant inflation you have to take your wins where they appear.
> maintaining a list of ‘permitted’ companies – wouldn’t be hard to create. At least not with the resources of a government.
Sure about that? Observation shows this current shower can’t walk and chew gum at the same time!
@TI:
Thanks for such a speedy and informative post. Seems, at best, it is still early days for this new wrapper.
@David F (#12):
Good point re latest OBR inflation forecast, that seems to have been largely overlooked.
The trouble with politicising a financial blog is that you can fall rather awkwardly between two stools
Politics are a fundamental part of a person’s persona and therefore discussion thereof can lead to fruitful but very fraught scenarios-especially in these troubled times
Finance is relatively apolitical and impersonal-certainly MR Market doesn’t give a stuff about any of us
Mixing these two very different beasts would seem to be very counterproductive
I notice other financial blogs that I follow-Citywire Forums and Bogleheads-either don’t allow political comments or have separate political sections of their blog
I suppose blogmeisters have to decide their own priorities and go from there
For an financial blog to potentially lose half its audience is a shame (Politics do split the population 50/50)
xxd09
@Speculatorus
How and why?
£60k salary is £45k take home.
£10k rent and £20k ISA leaves £15k to live on, £1250 per month?
That’s assuming that you don’t pay any of your salary into your pension (not even the 10k taxed at 40%)
I’m all for paying your future self first but this feels very excessive.
I can see an edge case, saving super hard for a house deposit, but that wouldn’t be a case for using a UK ISA allowance, or really for shares at all, you might we as well saving in a cash saving account.
@Andrew — Yes exactly that. It’s not that using the UK ISA for UK government bonds is the only option. It’s that it’s the one option that in theory pretty much all readers (even some of us active folk) would be able to deploy without needing to change their allocations at all or to faff with the non-restricted ISA holdings.
About the only exception among the passive crowd would be young / new investors who are still 100% equities and those who’ve decided to use hedged global government bonds instead of gilts for their nearly risk-free asset.
@Random Coder — Indeed. In homage to your name, I’ll know you’re very familiar with the concept of ‘technical debt’. For those who don’t, it’s basically that previous solutions/hacks/hardware choices or whatnot mean a version of the software today remains suboptimal, whether in terms of performance, cost, functionality or whatnot. It might be deemed too expensive or too time-consuming to junk the old stuff.
There’s a clear parallel with politics. An expedient move at the time, such as Labour’s personal allowance taper in the wake of the financial crisis, becomes stuck in the system as neither a feature nor exactly a bug. Something that’s just there despite now being clearly sub-optimal. And this is a high-profile example most of us are aware of. The system seems to be riddled with it, resulting in everything from a several volumes long tax code to those kind of cute laws about not riding a donkey over London Bridge on a Sunday.
Simon Lambert in This Is Money published ahead of the Budget a useful list of simple-ish fixes that could have cleaned up the tax code a bit. We got none of them, and more ISA complication (potentially, I think @KISS could prove right).
I do like taking the 2p out of the NI band, it’s targeted and sensible if he had to do something for political reasons. (I’m all for lower taxes, but not as unfunded gimmicks waved through on the back of an Excel spreadsheet and ‘reforms’ we know we’ll likely not see).
But a sensible system would roll NI and Income Tax together and make things simpler, as most of us would agree. And so on and so on.
Your point about how touted efficiencies in one year become unaccounted for missed targets the next year, without repercussions and with metronomic consistency, is also on the money. I suppose we must fall back on the old defence: of democracy being the least worst system!
@Ian — Thanks for breaking your silence. Please don’t wait to do so again!
@petejk — You write:
For what it’s worth I think this is a fairer critique. My feelings and frustrations do come into my writing, and I don’t think I’d want to stop that entirely. But I did repeat myself a bit with this post, which didn’t have the usual editing or reflection time.
Incidentally I just saw that tax guru (and sometime Monevator reader) Dan Neidle called the Brit ISA “a terminally silly idea” on its announcement yesterday.
It transpires he warned against it the day before the Budget on *checks notes* the Conservative Home website, concluding:
I’m happy to be in his company on this.
@TI well it could be argued that EIS, VCT and SEIS are also in that category…
@mike — True, but those aren’t mainstream investments nor touted as such. I take the point though.
@Roland — Haha, indeed. Nice comment, though on the other hand one of the best comebacks I’ve seen to the anti-UK-ISA posts was somebody who wrote “Okay, so you’ve convinced us that Brexit created a problem, it’s a bit rude to complain about something being offered as a solution.”
I don’t think it is a solution and I don’t believe it was touted in that spirit (rather, more denialism) but there’s something to that.
It’s an interesting question as to what the statute of limitations is as to political decisions / harms / whatnot.
We officially only properly Brexit-ed three years ago so I feel right now it’s still very live more than a culture war issue. (I have a great graph for Weekend Reading on Saturday showing how immigration rocketed after the new post-Brexit regime came in, too, hilariously).
Also my position about Leaving from day one has been it’ll be a slow bleed on the economy. By definition that’ll go on for many years.
On the other hand, as others have noted even I (will) get weary of raising it in response to this or that woe eventually, even if in a counterfactual world things would be better.
An analogy might be Tories in the late 1990s still bemoaning Union barons from the mid-1970s, or Labour stalwarts blaming Thatcher for industrial decline in the mid-2010s. Yes there might be elements of truth but at some point you *mostly* have to move on.
I suppose I don’t feel we’re anywhere near that yet, and nor apparently does Jeremy Hunt. Hence the conflict.
Hmmm. If I can hold gilts in it I will use it all. If I can only hold UK equities however…
Not sure it would be worth the risk inherent in having my investments too heavily skewed towards the UK just for the tax incentive.
Very funny @roland and sadly spot on!
The serious point though is this is irrelevant distraction to the huge issues the government really needs to address- like all the culture wars stuff (including Brexit). Get the masses squabbling amongst themselves while they raid the tills and run off to California.
I’m currently in Egypt for the second time in 2 months – their currency has depreciated by a third (or is it a half). Was 39egp to the pound now 62.
Most of my assets are in GBP – probably a mistake (mag7 etc). But on a positive note I’ve got enough Uk investments to max the extra 5k for the rest of my life. It’s just the other £20k that’s the problem.
The US deficit also looks like a problem – perhaps property is the best currency
Ps phasing out NI is a great, if late, idea. Hopefully we’ll settle on 25% tax 0% Ni at JH’s next budget. And 45% on £60k+ with no phasing out of the TFA.
Why don’t you just move and live in a different country? Your writing is insufferable now. I scroll as fast as I can on your Saturday posts to get to the links; are you a high end personal finance blogger or a highly partisan political blogger?
@Mark — And there we have it. I don’t like your economically-damaging decision so I should move to another country.
Let’s not even get into how you made it harder for most people to do so (and yet immigration is at an all-time high anyway).
Why you guys think I’d take advice from you is beyond me.
I do understand you don’t like the posts. I wouldn’t enjoy a very right-wing financial blog advocating totally abolishing the welfare state, say. It would overshadow the financial insights for me, too.
So I wouldn’t read it. Simple.
@Boltt
If we phase out NI, then what rules would then determine eligibility/amount of state pension? I can’t readily think of an easy, fair solution to that.
@Curlew — I suppose we could look towards the US system for an overhaul. As I understand it* it’s explicitly based on lifetime taxes paid / earnings.
Rather embarrassingly, I only recently learned that the as a result the State payout in the US is partly determined by what you paid in.
i.e. Some people (higher lifetime earners, and hence contributors) get a higher State pension.
On the positive side this might encourage more universal support for that element of taxation (though not sure we see this in the US?)
On the negative side, you’re getting rich *state* pensioners and poor *state* pensioners, which is exactly what it would be reduced to, even though there may be other benefits of bringing more of what would be private pensions in our system under a State umbrella. (E.g. cost efficiencies, perhaps various extended protections.)
(*Our pension system is complicated enough so I may well not understand the US set-up.)
@ curlew
https://www.gov.uk/national-insurance
At the moment sick and UC adults get credit towards the state pension.
Workers need to earner earn at least £123 a week to get a stamp/credit. I don’t see the problem using the same rule going forward. The qualifying criteria is earning and this is measured for Tax already so very little change would be needed, if any.
Steavark comes here occasionally and has previously mentioned his $60k state pension (or similar) – there’s a maximum amount possible, and it’s earning related, for their pension and they contribute circa 6%
https://www.oecd.org/els/public-pensions/PAG2021-country-profile-United-States.pdf
1.Terrible misuse of taxpayers money. Will only benefit a tiny proportion of society, mainly higher rate tax payers. Therefore loss of higher rate dividend income tax and CGT (subject to allowances) for what is a terrible investing encouragement (UK equities). The cost: benefit to UK PLC will be a net cost -no one expects this in itself to increase productivity or UK equities returns.
2.Less informed retail investors, particularly the young, will be more likely to invest in UK equities, which has proven a terrible choice versus globally for a long time.
3.The Investor imo is perfectly entitled to express himself as he has, both tone and content, on the Brexit context of a pointless political economic decision.
“The Investor imo is perfectly entitled to express himself as he has”.
Can’t disagree. What I’d like though is the same stringent analysis to given anti-Brexit factoids as TI gives to other issues. This week the economy is apparently £100 bn smaller than it should be, the other week a 5% drop since Brexit vote was quoted. These are suppositions, in fact the UK economy was struggling along at about the same growth rate as the Euro zone or other western European countries pre Brexit , and the same behaviour post Brexit. To turn that around if we had voted to stay the same, the claim is that the UK economy would have suddenly taken-off and consistently out-performed our neighbours for the last several years ? That’s really not believable.
IMO, the effect of Brexit is vastly over stated. Sure, there are some losers, but there are also winners – importers from outside the EU zone, maybe even domestic suppliers. Losers will always shout louder. For better or worse , the UK is mainly a service sector economy and the EU single market never existed for services anyway . For some services, trade is easy without significant barriers in or out of EU – many engineering fields, new technology and IT for example. For other traditional services (eg. Law) , there are huge trade barriers that are nothing to do with being in or out of the EU . I’ve worked for the past 20 years or so for various small service sector companies, typically exporting 80-90% by value; Brexit and the EU was and is pretty much an irrelevance for us.
In Private Eye format , the main factors affecting the UK economy are something like
1. education, training and skills
2. war in Ukraine & inflation hit
3. aftermath of COVID
4. our useless Government
..
er …
99. Brexit
State pension. Have people forgotten that we used to have an earnings related component to SP which was abolished with the big reform of 2016? Perhaps you’re all too young or were never that interested in state pensions. Anyway, we are certainly outliers internationally, in having no earnings related component to our state funded pension scheme. That has pros and cons. On a forum like this full of high earning people who haven’t had any breaks in employment, I imagine a return to an earnings related scheme looks attractive. But we have btdt and, as I say, it has downsides. Maybe have a look at the policy reasons behind the 2016 reforms. Re-introducing an earnings related component implies higher state spending on pensions, too, and would likely mean increasing rather than reducing NI – so be careful what you wish for.
Regarding NI and income tax combination, of course if one had a blank sheet of paper it would be nice to combine them. The complexity of uncoupling lifetime NI contributions from state pension eligibility is one reason why I’d put money on it never happening. Most countries have similar separate ‘tax’ arrangements for state pension/social security eligibility, which allow credits to be registered over a number of years, and links pension entitlement to duration of contribution. Income tax is just year by year. So you’d need some kind of system for logging whether you’d gained sufficient pension credit each year…and might simply end up reinventing something not dissimilar to what we have.
If I wanted a dry article about how best to use the UK ISA there’s any number of websites I could go and read.
I’m here, specifically, because I enjoy and value getting TI (and TA’s) personal opinions and views too. Long may they continue sharing them with us.
I echo most of the comments above.
The British ISA is desperation from a failed experiment by the most dishonest bunch of cronies we’ve ever had.
If you can’t run a personal finance blog without adding individual flair then we might as well pack up and go home. Besides, I can’t imagine those complaining are supporting your work.
Keep writing and don’t change.
Thanks!
Collective investments such as Investment Trusts qualify if they hold 75% qualifying assets. So 25% can be global and the other 75% holdings in other ITs that are 25% global and 75% in … other ITs that are … does anyone remember Splits?
Excellent article @TI. Thank U. I give BISA a <5% chance of eventuating as Labour won't be interested. A Brexit sticking plaster. Higher coupon conventional gilts certainly make sense here if it does come to pass though, as the ILG RPI uplift is tax free in any event and it's not so hard to use up the £500/£1k pa PSA for interest bearing funds/securities/savings.
I did wonder if readers had views on the alternative of income centric UK invested ITs on a discount or UK infrastructure ITs? HYP never really worked for me personally in the 2010s (lagged my core holding global trackers) but, with quite significant & persistent discounts now, maybe 2024 will be a better buy in point for UK HY ITs.
@TI – keep up the good work.
This site is a fabulous wealth of investing information and most articles and back catalogue still free to use. I appreciate that even if others want to complain on voicing a political stance once in a while.
For my part, I now agree with what you say, even though I’m now embarrased to admit it. I unfortunately was duped and voted back then for the Brexit sunny uplands. I now see this was a huge error for which we are all now paying for. I’m not political but I naively was persuaded by the then arguments from the politicians – who’da thought politicians wouldn’t tell us the truth?? So like many I swallowed all the rubbish about greater trade with nations around the world (better than the dying EU apparently), sovereignty, less immigration, less EU red tape etc. none of which has materialised as far as I can see and all Farage says is the Tories haven’t implemented it very well? In fact the only benefit I can remember arising, so we were told, is we probably got our covid vaccines expedited by not being in the EU – but by how much in reality?
I agree with him the Tories are total rubbish but then so are Labour/Lib Dems and most politicians come to that. I mean how well did it end for Labour last time? Can you trust any of them – I don’t think so – they’ll all sell their granny to the highest bidder or say black is white to keep/gain power. They all equally had their noses in the trough during the expenses scandal, pretty much. But now just to blame the failure of Brexit totally on them and nothing to do with the lies of himself, Banks, Johnson, Gove et al is ridiculous.
We can’t blame it all on the pandemic either, the rot had set in before that and everybody can see how the state of the economy and increased customs red tape has affected the country – just to name two of the many. They didn’t even tell us how travel to the EU, or taking residence there, would be so badly affected.
So I for one think your views and musings are very valid and are not ranting- we are all worse off for it – and it’s your blog – even though I know you won’t take much that a former Brexiteer has to say (but at least I’m one that’s come to my senses now – albeit eventually – and too late). I think many people have changed their mind based on the outcome since and if re-run the country couldn’t possibly vote for this abortion again!
PS. OTOH, I can see why @TA keeps his political views to himself though! Can’t blame him.
All the best to all of the Monevator team – you all do a great job at what you do.
@Alex — Yes, that’s the dilemma for proper passive investors when it comes to putting the equity portion in a Brit ISA. (A one-off £5K might not matter too much but after 10 years of contributions…)
Gilts from the ’40’ bucket are the solution for such investors I feel.
@Tony @FitandFunemployed @DeltaHedge @Ryan — Thanks for chiming in with the support, it was getting a little one-sided there. Re: Infrastructure ITs, I’m structurally wary, even on big discounts, though far less so than when they were on big premiums! I dip in now and then since they corrected to no great result, but I think if I wanted a LTBH as a strategic allocation I’d want to go for something more global or diversified. There’s a lot of political risk with infrastructure (and renewables) so geo-diversification makes sense.
@Gadgetmind — Long time no see! Nice to hear from you. 🙂
@Mark — UK GDP is about £2.2 trillion from memory, so £100bn and 5% are close enough for government work, especially as it’d be silly not to agree there’s a wide error range here. However long detailed studies from Goldman Sachs (the 5% guys) or £100bn (and counting) from other bodies (including the OBR if memory serves) are I feel of more merit then comments on the Internet from Brexit supporters who look past the many years of stories about businesses suffering from Brexit frictions etc, loss of investment, whatnot, and basically some axiomatic rules of economics, and then say “nothing to see here”. At least as far as I’m concerned.
I think it’s a straw man to say the UK economy wouldn’t be soaring anyway if it weren’t for Brexit. I agree about that too.
Clearly we’ve been through the ringer with Covid, Ukraine, etc. Plus the UK was in a worst spot post-2009. However economically the UK had been doing fine in the EU. There were basically no business impediments (or at least not impediments that didn’t have an offsetting benefit). There were (very modest IMHO) political comprises that some people couldn’t accept. Fine, I’ve never disputed that reason for voting to Leave. I’d guess actual fact-based sovereignty concerns motivated at most 10% (i.e. 20%) of the 52%, going on the various bits of voter analysis done at the time and afterwards. (I won’t dig that analysis up again because it tends to annoy those who didn’t vote Leave for *this* or *that* of the dozens of contradictory reasons, and even I agree that voting motivations are getting futile to debate eight years on).
Staying in the EU for economic reasons was perhaps hard to understand for some because of this language of ‘crash’ or ‘soar’ or whatnot. (I think the Remain camp didn’t cover themselves in glory there either, though as so many Brexit voters now say “nobody told us” this or that I can see why they tried to talk in blunter terms).
The economy only grows by a few percent a year. Usually 2%-3 or so outside of recessions and booms. If we make our terms of trade difficult, UK businesses less competitive in Europe, and also put off international capital by multiple years of political madness and this all knocks a percent or two off GDP for a decade before we rightsize / find our feet, then you can see it’s very meaningful, even before that hit compounds over time, which is what will happen.
We won’t be a bankrupt or anything like that but we’ll be permanently poorer, pending some yet to be seen post-Brexit benefit — one that wouldn’t have been possible if we’d stayed in the EU (including global trade, such trade has to be markedly superior to the deals which will be won by a trading bloc of 600 million people. I won’t hold my breath.)
@ST — Thanks for that long comment and congratulations on changing your mind. It’s never easy for any of us to do that about anything, and even harder to admit it, even on an anonymous forum. I salute you sir.
Incidentally @TA has shared in passing his views on Brexit, and suffice it to say we are of one mind. (If anything he’s even less charitable towards politicians). However he writes about long-term passive stuff and avoids home bias in the main, especially nowadays, which helps him steer clear. In particular he doesn’t do the Weekend Reading articles, where most of the commentary on political issues has been broadly quarantined most of the time. @Finumus is even more anti-Brexit than me, he considers himself politically radicalised by the whole palaver.
@all — Apols to those individuals I haven’t been able to reply to, been hard to keep on top of this thread with other things going on etc. Useful comments always appreciated! 🙂
Just a small vote of encouragement for @TI. You both do wonderful work which is highly appreciated.
You have every right to express political views, right or wrong, that you perceive to have relevance to investors. If readers don’t like it, they know what to do.
I am disappointed by the tone of several comments above. Maybe this is symptomatic of the increasing desperation of Brexiters who are themselves under huge pressure to demonstrate any meaningful economic advantage of Brexit and are steadily losing support in the polls.
Keep up the great work!!!!
TP2.
@TI
Excellent article. You highlight the damaging economic effects of Brexit and certain readers take personal aim at you. If Brexit was working then they would have a strong argument. They don’t.
As I tell many Brexit supporters, they should be up in arms that what was promised has not come true i.e. NHS spending up, migration down, and ‘oven ready’ deals with other countries.
We are still stuck in the Pre-Brexit debate instead of demanding our politicians honour their promises to ensure the UK would be a leading ‘economic force’.
Keep up the good work,
Lee.
Considering how widely panned this UK ISA has been it seems increasingly likely @KISS had it in the first comment, it’s a Tory gimmick Labour will have zero incentive to implement.
I guess that’s a good thing from the perspective it’s very poor policy for all the reasons discussed.
From a purely pragmatic (slightly selfish) perspective I was glad to see an ISA increase in any form but perhaps should take the wider view!
@TI apologies if it was my comment above that prompted a less than positive direction in the comments! Wasn’t my intention. Big fan of your work. Interested in your comments on infra trusts above, can I raise a request for a trusts deep dive to be added to the moguls article shortlist? Would deffo have to upgrade for that one!
I agree it’s another pseudo-patriotic nonsense and a symptom of how unserious the so-called conservatives have become. Politics aside, I’ll gladly take the additional ISA allowance, shift some of my UK trackers or gilts and keep my overall allocation to UK stocks exactly as before.
Thanks for the article, that has clarified things a little. I remember and utilised single company PEPs and thought it might be a return to that silly concept, so I am relieved to hear funds will be permitted. Still a silly idea, just not as daft as I had feared.
We invest using geographical trackers, but weighted according to the FTSE All-World Index, so incorporating the new BISA into our portfolio will not add too much extra complexity, provided FTSE 100 trackers do end up being permitted.
Hopefully at some point a future government will simplify this silliness and allow BISAs to be merged with ISAs, just as single company PEPs were.
It will be interesting to see how many brokers bother to offer the BISA. Take up of LISAs has been slow.
@TI Can I just add another voice to those supportive of inclusion of the political context in these financial discussions. I have no wish to read bland explanations of proposals such as this, that can no doubt be done by AI these days. Fully appreciative of all the work that goes into making this site.
On Brexit, if it was a good idea, why do we have an internal trade border between two constituent parts of the same country?
I’ll take the extra £5k on offer. The NI drop to 8% makes locking money away via Salary Sacrifice less appealing than it did when the rate was 12% so maxing my ISA is a possibility.
Regarding all the handwringing about Brexit and TI being unreasonable in bringing it up its failings, he wouldn’t have write it if Brexit proved successful now would he? So a little less carping and a bit more introspection from the Brexit wing wouldn’t go amiss.
@TI #65 “through the ringer”
Send not to know for whom the bell tolls, it tolls for thee! You may remember that I pinged you for this once before, a while ago – wringer nor ringer would chime better :).
It might be uncomfortable for some but please continue to point out the ongoing failure that is Brexit. It’s important not to give up if it’s going to be put right.
The criteria for a British ISA is as clear as mud. My money is on it never happening.
Keep up the good work.
@Naeclue “Hopefully at some point a future government will simplify this silliness and allow BISAs to be merged with ISAs” I agree but we would need a referendum to allow this. It wouldn’t be reasonable to give up our hard fought freedoms without the will of the people…….
Windy
100% agree with you @PC:
‘It might be uncomfortable for some but please continue to point out the ongoing failure that is Brexit. It’s important not to give up if it’s going to be put right.’
It is perfectly sensible and understandable to remain disheartened and concerned about the ramifications both economically (as is becoming undeniable to surely all, even hardcore bexiteers?!) and day to day when traveling to the EU (and us getting held up for 2 hours in Venice passport control on way at half term, then nearly missing a plane home from Geneva last weekend due to 1 hour queue for ‘non EU passport holders’ on the way OUT of Switzerland!) Its depressing and sad. But there you go. my parents voted for it and still have the red EU passports that are no longer accepted as such . . . . . . .
Perhaps my generation can one day reverse decisions, once sadly my parents have maybe moved on, but in the mean time it appears we are going to all be made to suffer the consequences . . . . . . .
great articles as always. and it just HAS to be pointed out when the Torries (or other parties!) pull propaganda pranks such as this in my opinion. so good on you @investor !
This is the first time in about three months I’ve read an article – goodness knows I’m glad I haven’t wasted all those hours on Saturday mornings! Anyone on the fence who has found monevator post 2016 to be to financial journalism what Steve Bray is to music should find a better way to spend their Saturday mornings. You won’t regret it ,-)
I might be in a fringe camp who benefits from this plan as I can shelter another £5k per year from the taxman of corporate shares grants from my employer.
Usually I sell the lot to avoid concentration risk, but hoping that in future it will just be simplified to £25k ISA allowance. Realistically only beneficiaries are high earners who are already capping out their ISA allowance so a policy decision, it’s pretty stupid.
FWIW as regards boosting investment in UK listed assets this may well reach its policy aims over time – over the next ten or twenty years the ISA allowance could be kept at 20k and the BISA raised to 20k, alongside the continued relentless taxation of property investment. Factor in a bit of inflation and suddenly investing domestically is incentivised and takes place to a meaningful degree.
The war on BTL wasn’t achieved in one budget and for years after the direction of travel changed it was slowly chipped away at.
Whether it is a good thing or bad thing is difficult to say. As investors we have very much come round to the Lars Kroijer approach. Should we be tax incentivised to take that approach ? Hard to know, hard to say.
Sadly I feel that the Brexit happening is just another symptom of the poorer(more than 50%?) of our population emitting yet another unheeded cry for help rather like Scottish nationalism ( Scots currently seem to prefer Germans and French to their English counterparts -seems to be mutual!) ,Trump and an EU steadily going right etc etc
Interestingly Scotland now being run by Scots Muslims as England is by an English Hindu-these leaders seem to be distinguished by having functional families with children in spite of worries about climate change ,overpopulation and gender/racial/identity politics etc etc-are these conservative attitudes?-does someone actually believe in the Britain we know and love?
The current Labour party on the other hand is run by old white men-not a women pm etc in sight-very different
Many people are not worried about getting to Venice or the south of France in good time for a holiday-rather more concerned about jobs,rates of pay ,policing (lack of?) – standards of living are rather more important to them
Unless our ruling classes pay more attention to these fundamentals Brexit will be the least of our problems
Politics unfortunately does trump Economics but only in the short term when Reality (debt etc) kicks in -hopefully via soft as opposed to a hard landing
xxd09
First comment after years of lurking. Wanted to say thanks for all the free content and keep it up!
Political discussion is completely relevant in response to the politically-motivated bribe. A sensible government would be offering more effective incentives to increase economic activity, like raising the IT thresholds, not pandering to those who can save over £20k a year.
We’re now at 32% v 56% in favour/against Brexit.
https://www.statista.com/statistics/987347/brexit-opinion-poll/
Brexit as implemented was smashing ourselves in the face with a hammer. The damage continues to be a drag on our economy so it’s still relevant. I was surprised to see so many snowflakes getting their feelings hurt by your tone!
Something worth remembering is that if you invest in a UKISA for 50 years, you’ll have put away £250k.
The average house in the UK is higher than that- and reading about some FIRE types who are earning the big bucks, their housing budget can easily be £1m (London links, excessive number of bedrooms, forever home, good school…)
Nobody would bat ab eyelid that we invest so much into property in the UK – and if you were offered an extra £100,000 of mortgage debt, your housing budget would increase accordingly- but everyone is fretting over £5,000 tax free to invest in a UKISA – I think that there’s a lack of perspective and cognitive dissonance.
@Xxdo9
The blog’s readership is probably close to top 10% IQ, top 10% earnings potential. It’s a bit of an echo chamber and few seem familiar with regular people’s lives/issues:
1-Why can’t I get a dentist
2- Why are ~50% of London’s social housing being allocated to foreign born visitors
3 crime, schools deteriorating
4 strange beliefs being encouraged
5 why does a Normal job pay little different to non-workers (ps it’s probably not the wages that are the issue)
I love the blog and the comments but there’s a whiff of talking down the Uk here and some other biases
People who spend their time arguing with strangers online about Brexit remind me of Jehovah Witnesses who come knocking on my door. They want to convince a stranger of their beliefs and error of peoples’ ways and the true path to enlightenment. Ultimately, I give them 5 mins because I don’t want to be rude, but I end up feeling sorry for them as pissing in the wind is a poor way for anyone to spend their effort, enjoying and time.
Getting into an argument with a complete unknown stranger online is not validation nor ultimately achieving anything. There’s plenty of places to get anti Brexit anti anything ranty discourse. It’s a shame if the core message of this great blog was lost in it.
@Vic Mackey, if the Brexiteers had but 1% of the coherence of your Jehovah Witnesses …
@xxd09 “The current Labour party on the other hand is run by old white men-not a women pm etc in sight-very different”
?? I don’t understand this comment.
Have you looked at their leadership team? We are almost certainly going to have a female Chancellor come this time next year, and it seems like they actually have a >50% of females on the front bench.
As for the bashing of the anti-brexit commentary in this post and more generally, I’m not sure what you guys are still doing here?? I’m far more bored with the same repetitive complaints, than some real commentary by TI on things that are actually happening now.
@Boltt… did you join/stay in the workplace as a result of the changes to the LTA and latterly NI ? That’s a more interesting take than the rage echo chamber talking about a minor tweak. Take a Quick Look at this blog from 2010-2015, loads of contributors, wide range of views below the line, interesting articles. Now it looks like Change UK rebrand
@BB
I’ve remained early retired but did apply for a perm role late last year. I’ve been out too long really, and won’t come across as keen enough (plus there’s been a bit of technological development since I left).
@flotron “ I’m not sure what you guys are still doing here??”
Hmm, nice tolerant behaviour – this is a remain blog for remainers…..is the echo chamber not loud enough? It’s healthy to read/listen to some things you don’t understand or agree with.
@Vic — You write:
The irony being that you were one of those who instigated the argument in this thread.
I just reported on a “UK ISA” that is *explicitly* designed to help support a weak UK stock market that — everyone agrees de-rated / saw outflows after Brexit, which won’t achieve much (see the numbers in the associated articles in the Weekend links today) and which was clearly political.
@BBlimp — Um, something happened in 2016. We voted for a bad choice based on a dodgy manifesto and got one of the worst possible outcomes — and even the things Brexit might have actually changed it hasn’t (eg to lower immigration, where despite the end of freedom of movement immigration is running at a record high, with the OBR finding an extra million people down the back of the sofa being the most recent hilarious manifestion).
This blog’s readership has certainly skewed anti-Brexit, no doubt in part because of my stance putting some off.
But I’d say the main reason there’s not a range of views about Brexit is because — at least to-date — there’s only one verdict a rationale person can reach about Brexit’s achievements.
flotron-in the interests of facts
Conservatives have had at least 3 female pms-Labour nary a one!
xxd09
@TI
Incredulous that VM (great show by the way) has touched on the old adage regarding ‘Don’t argue with strangers as a passerby won’t be able to tell who the idiot is’.
Brexit is not the cause of the UK issues but a symptom of socio-economic conditions that certain politicians are exploiting. The losers will be the poor, immigrants and vulnerable as usual, and probably not the average Monevator reader.
Xxd09 has touched on the issues. I’m not too sure on the racial slant but generally agree in principle. I thought BBlimp was going to leave the site for good but it looks like he still can’t resist biting to your articles.
As previously mentioned, it is for the Brexit voters to ask why their vote has not been delivered. It is for all of us to demand both human and economic growth from our ruling politicians.
@Boltt – it’s clear what TI’s opinion is, I don’t understand why someone would continually visit the site just to moan at this opinion when it is intertwined with political events of the current day
@xxd09 – thank you for the clarification. I’m more interested in the present than the past. Cheers
More on topic, I’m not sure I understand the excitement regarding Gilts in the B-ISA. They are free of capital gains anyhow, so surely its better to take some low coupon issuances in your GIA and keep your ISA for better performing equity trackers.
I like the idea of a UK ISA. People can invest where they like, but if the government is going to forego income and capital gains tax, it must benefit financially (and yes, politically) in some other way.
Sticking to the financials, ISAs obviously incentivise people to save money so they will perhaps rely less on the state in later life, therefore saving the state money. That’s fair enough.
If the UK was awash with funding for investments then yes, allowing ISAs to invest anywhere in the world makes sense, as it allows investors to maximise their risk-adjusted returns, in theory anyway.
But the UK isn’t awash with investment funding. The UK has massively underinvested in itself for decades. The UK ISA wouldn’t be a silver bullet, but it could form part of a cohesive plan to encourage investment into the UK.
The UK ISA would redirect some of the UK’s savings capital back into companies that, on average, invest more into the UK economy than companies on the NYSE or other exchanges. If the UK ISA was attractive enough, it could help to lower the cost of capital for UK firms and lower the hurdle rate they’d need to invest in the real UK economy.
There may or may not be a trade-off in terms of potential returns from UK stocks versus foreign stocks, but if you want to invest in foreign stocks then that’s still allowed. Just don’t expect it to be subsidised by the UK taxpayer to the same enormous extent as it currently is.
On that basis, here’s my proposal, which I suspect won’t become government policy:
(1) Get rid of the Lifetime ISA as it’s idiotic.
(2) Reduce the standard ISA allowance to £10k per year.
(3) Introduce a UK ISA for UK stocks or bonds and funds that have at least 75% invested in UK stocks or bonds, with a £10k annual allowance.
That’s it. Simple, with more than enough allowance for almost everyone to invest how they like, but with a bit of a (much needed) UK tilt for those wealthy enough to have more than £10k spare per year.
@flotron – Here in the present there is a Hindu PM and another middle age white male leader of opposition. There’s nothing wrong with middle aged white men, just seems a coincidence pushing 50 years since Maggie became PM and there’s always been a ‘good’ reason women can’t lead Labour ? Not exactly inspiring for the 50pc of the electorate who it appears Labour wouldn’t allow to be party leader/ PM is it ?
@Boltt – Ah give it a go, knocking around with youngsters is good for you (and them !), let alone having a few years with throw around money. The guy I share an office with has returned from early retirement, is rich as Creosus, and enjoys the wider office banter . Does the youngsters a world of good to have his experience to draw on
@Investor Re the accusation of “ranting” against Brexit. It’s your site, and if you want to rant against this terrible error which will be reversed as soon as is politically feasible, please carry on doing so. Any barely educated elderly ladies and gentlemen who are still advocating in favour of it are offensive to me. Normalisation of the idea of Brexit is never going to happen, and this kind of minority crankiness shouldn’t be tolerated, and is inherently offensive. I will feel very annoyed if you change your tone on this subject in any way due to the tiresome bleatings of these senile idiots.
“It’s all about enabling Barry Blimp to put £5,000 into Rolls shares in a specially-designated UK ISA and then to boast about it at the golf club.”
That brought a smile. Don’t overly fret about Brexit; nature is already removing the voter generation which was heavily responsible for that dreadful mistake. On the “British ISA itself, if they really did allow holding of UK fixed income, that would be helpful. The frozen savings allowance is a pain in the neck.
Really good article, I agree, pointless damage control tinkering, trying to repair brexit self harming fiasco not so much fiddling while Rome burns as arguing who will hold the violin. I dumped all my U.K. shares before the referendum and moved into an S&P tracker ( no more stock specific risk either ) euros and USD, I only use U.K. T bills short duration during this high interest rate environment. It really paid off, but it doesn’t make watching the demise of the U.K. more palatable.
Not sure we should lament the state of the UK stock market too much. It’s increasingly a “Value” market, with many stocks spinning off reasonable dividends. If you’re planning a retirement, then a flow of dividend from stocks and bonds is not a bad place to feather the nest, and prop up any government P0nzi pension they make care to push your way, out of the goodness of their heart.
The US markets suck in huge amounts of foreign investment money because of its size, the wide choice of investments and because many investors invariably chase performance. I sense a day of reckoning coming in the US Market, but don’t quote me on that. Maybe this time IS different, and the economic cycle has somehow been defeated.
OMG Rachel Reeves now backing £5k p.a. Brit ISA:
https://www.telegraph.co.uk/money/investing/isas/labour-backs-new-5000-british-isa/
So either my assessment of their being a 5% chance (at comment 63) was way off, or the unlikely has eventuated.
God, I hope that this doesn’t mean either or both of Labour restricting HR (and AR) relief on pension contributions and/or reducing the pension Annual Allowance – i.e. they get out the ‘good’ news first, before the GE, on ISAs, and then drop a pension bombshell later.
FWIW, if we do get a £5k p.a. Brit ISA soon, then I’ll possibly use it to implement something along the lines of FundExpert’s “Dynamic UK Blended Portfolio”, perhaps alongside a few discounted UK equity income and/or UK infrastructure ITs. Not any sort of recommendation. Not any sort of advice. DYOR.
@Delta Hedge — Yes, it’d be an open goal for the Tories to say they weren’t going to do it, but they can always drag their feet or quietly drop it after being elected as I highly doubt it’ll be a manifesto pledge.
A bigger risk (from an investor’s POV, I can see the political logic) is if they keep it they’re more likely to chisel it out of the existing ISA allowance.
There’s plenty of cheaper stuff to put in a Dad’s Army ISA right now. That won’t always be the case (at least I hope not!)
It’s the fundamental concept that is stupid and sends a poor message to already poorly investing-educated (would be) investors.
Update: Rachel Reeves is *probably* killing off the British ISA:
The UK government has dropped plans for a “British Isa” that would have channelled savers’ cash into London-listed stocks over concerns that it would “complicate” the investment market for individuals.
Two people close to the process said Labour had abandoned plans to push ahead with the new Individual Savings Account product drawn up by the last Conservative government, which would have allowed an extra £5,000 for UK-listed equities only.
“We are not planning to complicate the Isa landscape even further,” one government figure told the Financial Times.
The Treasury insisted that no final decision had been made, adding: “The government will provide further information on its plans for the British ISA in due course.”
https://www.ft.com/content/64cd3caf-c36a-4e51-8e19-d430f3324d77
Good riddance if true.
Thanks @TI. I’ve a horrible feeling that they’re going to reduce the ISA allowance and/or make contributions subject to the notional size of the accumulated ISA, as @Finumus has suggested might happen yesterday.
We’re entering dangerous territory for UK savers and investors deferring consumption today to try to provide for their future retirements. No good deed goes unpunished.
God help us all if @vortexgently’s fears yesterday about yet to be crystallised S&S ISA gains being taxed comes to pass.
For reasons we maybe shouldn’t discuss, I massively accelerated disconnecting my own financial situation from that of the UK in mid 2016, and at no point so far has that been anything other than a massively good thing. I’m underweight UK across the board, have managed to make the UK state pensions (we”l both get max single tier assuming rules don’t change again) a nice to have but mostly unnecessary, so the only way HMG can screw me up now is via a move to make ISA gains/income taxable (unlikely) or playing with IHT.
They have done the latter and who knows about the former?
@gadgetmind — Nice to hear from you. You might enjoy this very recent interview from Merryn SW:
https://podcasts.apple.com/gb/podcast/argonauts-barry-norris-says-invest-in-argentina-and-the-us/id1654809850?i=1000678595211
I don’t agree with the bloke about the energy transition, nor do I think Labour has suddenly doomed the UK in four months — versus the damage done before, including the lamentable 2016 decision you allude to — but he makes his points stridently re: the UK and Europe versus the US.
I’m very overweight the UK, partly on general valuation grounds and partly on clearer active opportunities. But yes, it’s been the global market lagging move so far…