What caught my eye this week.
For most of the week, my Weekend Reading links included articles warning that Rachel Reeves was finally going to cut the cash ISA allowance at her Mansion House speech next week.
The rumours had run for months. At last reality was at hand!
Yet by the end of the week, it was all change.
From the BBC:
Rachel Reeves was thought to be considering reducing the allowance for tax-free cash savings, in a bid to encourage people to put money into stocks and shares instead and boost the economy.
But strong opposition from banks, building societies and consumer campaigners mean any such move has been put on hold.
The Building Societies Association said it welcomed the Treasury stepping back from making any “hasty decisions” on ISAs.
So, we’re finally out of the woods on this one?
Not so fast. That same BBC article quotes a Treasury spokesperson as saying:
“Our ambition is to ensure people’s hard-earned savings are delivering the best returns and driving more investment into the UK economy.”
…and it adds that changes have not been ruled out for the future.
Similar pieces in The Guardian and the FT tell the same on/off story.
Stranger than fiction
Perhaps you blame the media for this.
After all, nothing gets a certain class of drive-by readers clicking and sharing like a threat to their personal wealth.
That was my co-blogger The Accumulator’s initial take.
TA compared the early cash ISA rumours to the annual ‘Pension Allowance to be SLASHED’ bogeyman that’s brought out every March – apparently almost in concert with wealth-gathering (and advertisement-running) financial services firms – only for things to stay the same most years.
But I judged there was more substance to the cash ISA threat. And by Thursday I was readying myself for some modest but smug satisfaction at being proven right.
Foiled again.
Smoke and fire
There are reasons why I don’t entirely blame the media for the ISA story however.
Firstly, many people want to hear about this stuff. Even if it is all rumours.
When the threat to cash ISAs flared up for the second or third time earlier this year, I ignored it in these links. I felt it was time to wait for concrete news from the Chancellor.
Yet readers asked me afterwards why I’d not included the story. Some even sent me links to it themselves.
The more important reason not to shoot the messenger however is it’s the Government itself that is cranking the handle on this rumour roundabout.
That’s why all the main outlets ran with the ‘no change’ story within hours of each other on Friday.
The official word had come down from on high that cash ISAs were to be left alone. So could they please mention this ASAP to their readers?
Make up, break up
For decades now government policy has been more and more determined by focus groups, public relations concerns, and the electoral calculus, as much as by what the country really needed.
And for the past 15 years or so, this strategy has included a much more explicitly open dance to trail potential policies in the press to see how the public reacts.
Whoever is running stuff up the flagpole in Downing Street must have severe tennis elbow by now!
Of course, politicians have rarely ever given us entirely what we needed, unencumbered by worries about the democratic popularity contest. Perhaps unity governments during wartime were the exception.
But with the present crew the situation is getting out of hand.
We saw it before Rachel Reeves’ first Budget. Her doom-laden stocktake on Labour winning the General Election raised more questions than it answered, leading to months of speculation. From an early mood of relief and even optimism, Britain fell into almost a paralytic stupor waiting to find out what Reeves would axe, or where taxes would rise.
And now savers have endured many months of wondering about their cash ISAs – thanks entirely to trial balloons being floated up from Whitehall.
Ask the audience
I understand why they feel the need do this.
Much of the electorate has lost all interest in evaluating policies. The Overton Window to make outlandish pronouncements in opposition about everything from immigration to taxation to nuclear submarines is wide open. But that same fact-free tribalism narrows the freedom to act when in power.
On top of that, judging by last week’s welfare U-turn Labour can’t even predict how a few hundred of its own MPs will respond to its policies. The electorate must be a black box by comparison.
However making up legislation as you go – based on how much furore your hints caused on the Internet and whether you think you can handle any further backlash – is no way to run a country.
Many of us despair at the US president’s reality TV show-style decision making.
But this policy-by-public-plebiscite experiment we’re running is arguably only a more genteel version.
Deal or no deal
There are consequences everywhere – but at Monevator our concern is with people’s finances.
On the one hand, MPs and mandarins alike lambast the public for not thinking long-term about their investments, or for not putting enough money towards their distant retirements.
Yet at the same time ministers fiddle with our savings and pensions vehicles with every other Budget – and threaten to make twice as many changes in between.
Enough is enough. This government started with five long years ahead of it and a big majority. Plenty of time to do what it thought was right upfront, and then to manage the consequences in the aftermath.
Pull the bandaid off if you’re going to do it. Picking at it will just make it worse.
Have a great weekend.
From Monevator
The Slow and Steady Passive Portfolio update: Q2 2025 – Monevator
Time to move into prime London residential property? – Monevator
From the archive-ator: The snowball and the paper trail – Monevator
News
Bank of England rolls out looser mortgage rules to help first-time buyers… – Guardian
…with Reeves set to launch a permanent mortgage guarantee scheme – FT via MSN
UK economy shrinks for a second month in a row – Sky
Forcing pension funds to buy UK assets ‘a form of capital control’, says Lloyds boss [Paywall] – FT
Triple-lock pensions to cost 3x more than originally forecast… – BBC
…while some benefits claimants take home more than minimum wage workers – City AM
Monzo fined £21m for customer sign-up check failures – Guardian
SpaceX set to be the world’s most valuable private firm – Semafor
London home sellers forced to knock thousands off asking prices – Standard
Real men burn stuff – Paul Krugman
London stock market in peril mini-special
These charts show the scale of the London Stock Exchange’s decline – City AM
Looser bonus rules and tax breaks needed to save LSE, says the CBI – Guardian
Products and services
Major banks cut mortgage rates – This Is Money
Eight ways to save on holiday spending and cut card costs – Guardian
Get up to £1,500 cashback when you transfer your cash and/or investments to Charles Stanley Direct through this link. Terms apply – Charles Stanley
Revolut now offers stocks and shares ISAs – City AM
Fintech Moovable launches new rent-a-bedroom service – Standard
Life insurance: the three key questions to ask – Which
Get up to £2,000 when you switch to an Interactive Investor SIPP. Terms and fees apply. – Interactive Investor
Free days out with MSE’s SuperSaverClub – Be Clever With Your Cash
The reality behind those €1-to-buy Italian homes – Guardian
All financial products will be on-chain, Franklin Templeton exec says – Blockworks
Pastel-coloured homes for sale, in pictures – Guardian
Comment and opinion
Why Lifetime ISAs divide opinion – BBC
How to invest your enormous inheritance – The Economist via Elm Funds
Room to manoeuvre – Humble Dollar
It could be worse: South Korea’s ‘peak wage’ system punishes the elderly – Guardian
Different kinds of rich – A Wealth of Common Sense
How Section 899 was scrapped from the Trump’s big US bill [PDF] – Raymond James
Evaluating the bucket retirement strategy after Covid lessons – Think Advisor
The children sitting on six-figure Junior ISAs – This Is Money
How to make more money without working more hours – Of Dollars and Data
Long gilts mini-special
Buy long-term gilts ahead of potential tax hikes, says UBS – This Is Money
What ‘vulnerable’ UK finances mean for gilts – Interactive Investor
Should you lock in a 5.38% rate for 30 years? – Motley Fool via Yahoo
Gilt traders seize control after Labour’s retreat on welfare reform – T.I.M.
Naughty corner: Active antics
Investing in bruised blue chips – Rebound Capital
How to get and keep a job at a multi-strat hedge fund [Podcast] – Odd Lots via Apple
A new twist on an old Buffett bet [Free to read] – FT
The latest US jobs report raises the risk of recession – Bonddad
Where have all the risk premia gone? – FT
Kindle book bargains
The Tipping Point by Malcolm Gladwell – £0.99 on Kindle
Chip War: The Fight for the World’s Most Critical Technology by Chris Miller – £0.99 on Kindle
The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone – £0.99 on Kindle
Essentialism: The Disciplined Pursuit of Less by Greg McKeown – £1.99 on Kindle
Or pick up one of the all-time great investing classics – Monevator shop
Environmental factors
Zonal pricing is dead. Now let’s be less absolutist on 2030 goals – Guardian
World’s most porous carbon-trapping powders hit the market – Nature
[Incorrect] Reform councillor calls man-made global warming a ‘hoax’ – BBC
Britain and Europe need to get serious about air conditioning [Paywall] – FT
Reintroduced Golden Eagles are struggling in Ireland – The Conversation
Why the Texas floods were so devastating – BBC
The environmental impact of agricultural crops – Klement on Investing
Robot overlord roundup
A deep dive into the Waymo vs Tesla robotaxi battle – Forbes
Not at the dinner table
From dollar dominance to the slop machine – Kyla Scanlon
Statistical evidence of the decline in political discourse – Klement on Investing
Free market economics is working surprisingly well in Argentina – Noahpinion
The tariff beatings will continue until morale improves – Paul Krugman
Ode to America – Net Interest
In modern Britain, any sort of protest can lead to jail – Guardian
Off our beat
How fake-will fraudsters stole millions from the dead – BBC
A guide to visionary architect Norman Foster – Wallpaper
How smell guides our inner world – Quanta
US measles cases hit highest level since declared eliminated in 2000 – John Hopkins
A radical 1960s experiment left thousands unable to read – Guardian
Wimbledon economics – Economics Observatory
What a mid-life crisis means for Millennials – GQ
“A difficult person who is waiting to die”: Patricia Highsmith’s final days – Guardian
American science is about to face its largest brain drain in history – Big Think
Why is everyone partying less? [US but relevant] – Derek Thompson
And finally…
“Progress happens too slowly to notice, but setbacks happen too quickly to ignore.”
– Morgan Housel, The Psychology of Money
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Just give me an additional 20k U.K. ISA allowance and I will happily put 20k a year into UK stocks, even mid cap if that was mandated. I thought the Tories were on the right track with that one, but I’m one of those weirdos that thinks LISAs are not complicated at all and great savings vehicles.
Cash ISA limit speculation probably just some government chaff to distract commentariat from what’s coming.
What do you reckon:
Autumn:
– BR/HR/AR thresholds frozen upto at least 2030, from 2028 now?
– AA reduced £60k to 40k
– Bye bye to £500 divi allowance
– Bye bye triple lock
Later, as things detriorate again (with the Treasury find more new black holes than Stephen Hawking):
– Pension tax relief restricted to BR?
– AR increased to 50%, with the threshold then alingned with the loss of Personal Allowance from £100k?
– CGT allowance gone?
And then, when Reform gets in, in 2029:
– AR abolished?
– IHT threshold raised £325k/500k to £2 mn?
– BR threshold raised £12,570 to £20k
– HR threshold to rise with inflation after 2030
– Triple lock restored
Allegedly to be paid for by DOGE 2.0 and no interest on BoE institutional deposits?
On the subject of long gilts (and relevant to long index linked gilts), the OBR ‘Fiscal risks and sustainability report – July 2025’ chapter 2, that came out this week is a very interesting read
https://obr.uk/frs/fiscal-risks-and-sustainability-july-2025/
Amongst other things it talks about the supply and demand issues for gilts up to 2072 for example discussing closed defined benefit pension schemes and their reducing need over time to hold long term gilts. They actually try to put numbers to it all, and they talk about the effect this will have on yields if (and it is a big if) that isn’t already priced in. They mention how increased overseas demand if yields increase might limit the scale of yield increases, and how the government might move shorter in issuing debt. While it’s all guesswork it’s still illuminating that they’ve made this attempt in a non waffly way. Of course active quantitative tightening is relevant here although that isn’t really discussed much by the OBR here.
TR49 is priced to give a real redemption yield of about 2.3%pa at the moment. CPIH over long periods is expected to be 0.4% higher than CPI according to the OBR although there is considerable scope for that to vary over even long periods. The OBR assume that owner occupier housing costs (that forms a part of CPIH but not CPI) go up in line with earnings rather than prices which is where the 0.4% comes from.
So TR49 for example is potentially an available 2.3%pa real return and arguably a realistic potential of a 2.7%pa real return over CPI price inflation to 2049 (2.3% + 0.4%). And that’s ignoring that the indexation is RPI and not CPIH up to 2030.
Interesting re your comparison with over the water -Atlantic that is
Many wars been stopped-India/Pakistan (potentially nuclear) ,Congo,Israel/Iran …..
Seems to have good approval ratings from the voters for his policies-borders etc
Economy -jobs and stockmarket performing well etc etc
I feel that Mr Starmer would give a lot to be in a similar political position
Time of course will tell -as always
xxd09
PS I believe that the US Treasury even had a surplus in June
Snowman: move from DB to DC, with consequential reduced institutional gilt holding in favour of equities (covered in TIM link), could reduce demand & lead to lower prices and higher (real) total returns for both linkers and conventional (even before factoring in any stagflation risk).
On equities: struck by this line in the FT link on valuation and risk factors: “given that most stocks end up losing money, all that really matters is buying the ones that sustainably grow their earnings”.
The Cash ISA debate seems overblown to me. I’d expect most savers with Cash ISAs are unlikely to be earning interest over their personal savings allowances. So it’s really just a waste of a tax wrapper, which could be better used for assets that actually grow.
Thanks TI and agree with your sentiments!
Further to the Gilt Special I saw this on linkers and thought of you and TA this week…. Paywall unfortunately
Britain is broke: how inflation-linked debt costs us £60bn
https://www.thetimes.com/article/ba95b251-3d62-4614-8200-967ad58e1257?shareToken=4008c1b9b1bc091f9007220fcd271e63
On ths OBR’s current Fiscal Risks and Sustainability report (link in comment#3): what are the OBR smoking?
So, DB scheme assets in gilts fall “from 26.7 per cent of GDP today to 5.6 per cent of GDP in the early 2070s” but, elsewhere in the same report, the membership of DB schemes is only projected to fall from 17 mn now to 12 mn by the 2070s.
Hello OBR. They’re not going to be any DB schemes left – in the private or public sectors – by the 2070s.
And if I’ve read the current Fiscal Sustainability report correctly (and my apologies if not), then the OBR seems to assume that the ratio of the National Debt to GDP can be kept near to its current 100% level over that period.
If that’s so, then it’s a complete fantasy.
The deficit hasn’t grown less than GDP for ages.
The OBR’s own 2024 base case is that public sector net debt reaches 274% of GDP by 2074, with state spending equivalent to 60% of GDP by then; but at the same time acknowledging in 2024 that this assumes productivity growth will average around 1.5 per cent per annum over the period to 2074, and that if that figure is actually closer to 0.5 per cent annually then the National Debt will hit 647 per cent of GDP in 2074.
Do the OBR seriously expect us us to believe that overseas buyers are going to snap up all that extra the gilt issuance at 274 per cent, less still 647 per cent, of GDP over the next half century?
If it can’t happen, then it won’t.
>There are reasons why I don’t entirely blame the media for the ISA story however.
I do. Just take a look at the headlines leading up to the Autumn statement. There was almost daily fear mongering about what the Chancellor was going to do and almost none of it came about. I find it difficult to imagine it didn’t have an impact on people’s decisions and the wider economy.
w.r.t. Cash ISAs – I can (and used to) hold £50k in Premium Bonds tax free. What’s the point?
@Brod
If it is a straight choice between Cash ISA and Premium Bonds then there are two major advantages to Cash ISAs:
(i)
The rates on Cash ISA can be (noticeably) higher than the expected return from Premium Bonds.
(ii)
ISA are a “use it or lose it” type of investment.
So by putting money into a Cash (or any other type of) ISA you have an extra tax-free allowance forever that can be utilised for, say shares, later on.
Of course if you are are Higher Rate taxpayer than Premium Bonds in addition to Cash ISAs are great.
@Ducknald Don — Evening! You write:
Absolutely the media does do that, and with a partisan bent too when it comes to most.
But as the rest of my article belaboured, in *many* cases this speculation isn’t pulled from the air. It’s an active symbiotic relationship with the government, which is presuming to govern this way. (Not just the current incumbents, measures have been being leaked and walked back for years now.)
Agreed! 🙂
@xxdo9 Trumps current approval rating according to The Economist is -12%, in comparison to +8% for Biden and +12% for Obama at the comparable stages of their presidencies. In fact Trump peaked at +3% in February and has been losing ground steadily since.
Lies ,damned lies and statistics!
The Economist like the Ft,Guardian ,Independent and Bloomberg don’t care for Mr Trump
His approval ratings average seems to be running at 45 % approval-55% disapproval at this particular moment
Ratings that Starmer can only dream of
However its results that count -investment performance is of particular importance to me as a retiree -In that area so far so good but who knows what tomorrow will bring?
xxd09