Weekend reading: parched country hears more about the cash ISA changes nobody asked for. Oh, and another PM
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LISAs are brilliant as a retirement vehicle. If gov wants to scrap higher rate pension relief an upsized LISA model would be a great, hassle free alternative.
So, the bottom line here for effectively mitigating ISA exposure to the 22% IT charge after 6/4/2027 is going to be?:
1). Cash interest: X
2). CSH2 ETF (SONIA based / MMF like with 0.01% spread) distributions: also X
3). ERNS LN ETF (with 0.05% spread) distributions: ✓
As noted, even a 100% equity investor has to hold at least some in wrapper cash for platform fees.
I don’t think this is going to raise much for HMT, and, given the headache for all involved here, just why bother?
Delta Hedge. I think the intended goal is to encourage the highly risk averse British public to invest in equities for long term growth rather than stay in cash. The British ISA (as an additional allowance) would definitely be utilised for investing in U.K. stocks by the wealthy. No idea how to encourage others.
They were trying to address a real problem, too many have their savings sitting in cash and lose out to inflation. Sure, the changes are clumsy and probably won’t achieve their goal. (Worth thinking about, how could it be done better?)
It’s a sign of the political culture that even a small change to something as dry as ISA rules brings a frenzy of inflammatory language from the lobbyists and their client journalists. The new rules, in some circumstances, become a mild nuisance (with easy workarounds). They are hardly “draconian”.
22% tax on interest, IF someone must have cash in the S&S ISA and IF they fail to use a workaround, is hardly “brutal”.
Those who use ISAs will spend 10 minutes to understand the new rules. Those who couldn’t be bothered before still won’t be bothered (thinking of no LSE-trained economist in particular).
The bigger the change, the bigger the shitstorm from vested interests. Starmer tried not to upset anyone and ended up pleasing no one. Let’s hope the next PM is bolder.
@marc.. (3)
That is my understanding, except for…
“No idea how to encourage others..”.
My idea is to combine various elements of the government ‘Help to Save’ scheme with the ‘Create Your Own Guaranteed Equity Bond’ ( from the right-hand sidebar link here on Monevator). The result to be the ‘Help to Invest’ scheme.
Sorry for 2nd comment. Excellent links (as ever). Much obliged. Random thoughts:
AWOCs – it’s the same issue with stock picking. Narrative follows price, not other way round. By the time they call the top or bottom it’s already happened. If you’re going to do anything but B&H then do quant. Rules. No judgment. No emotion. Trend line/price momentum, not words and arguments. Play odds, nothing more.
Quanta: Nuts isn’t it? Heartily recommend PBS SpaceTime on YT for this stuff.
Acadian: Yep. Vols up.
Noema: Mars has always been about Musk and his vanity. Why would you go 48mn – 200mn km to put people on a planet with 0.6% of Earth’s atmosphere when you can put a Bernal Sphere or O’Neil Cylinder at a Lagrange Point near Earth? Again, nuts.
Capital Speculator: Are TIPs a canary in the coalmine asset. Who knows?
Use Your Wealth: Maybe Fitzgerald was wrong. The Rich really are like you and me.
@Trufflehunt – interesting idea. 10% top-up might do, people would still want to claim their “free money”. So, invest up to 2500 per year into a selection of cheap index funds, with 5 year lockup period. Over 20 years this would build significant wealth.
You’d probably still need a “Help to Save” for those on very low income / benefits. Apparently, 1/3 of households don’t even have a £500 emergency fund, so they need to build this up first, in cash, before any stock investments.
The help to save scheme is great for low earners £50 pcm max and 50% bonus for what you save at the end of 4 years. I offered to do this for a daughter a couple of years ago – unfortunately she’s not yet eligible, she needs to earn £1 to join!
£2.5k for 20 years is about £104k in real terms using a 4% real interest rate – so worth about 33% of the state pension. £2.5k pa isn’t enough for retirement, Unfortunately.
Thanks for the links as always!
On the Conversation link I remember the 1976 heatwave well, we were on a family holiday camping beside the Thames at Laleham. Good to see an article putting this time in perspective. People of a certain age always seem to bring this up as ‘evidence’ that nothing is changing.
I enjoyed the Cory Doctorow interview as well. I’ve just been reading The Snowball, a biography of Warren Buffet, and some of his thoughts at the time on the Dotcom boom, it would seem to me, could be applied to where we are now with AI.
@Sparschwein (8)
My thinking was on the basis of ‘Help to Invest’ being a separate scheme to ‘Help to Invest’, though my wording was less than exact.
The ‘Help to Save’ scheme, with over 570,000 people having opened accounts over the years, with 90%+ of account holders contributing the maximum amount each month seems to be generally regarded as a success.
Although I wasn’t thinking of ‘Help to Invest’ as being suitable only for those on a low income, it would seem to me that people who had completed their savings contributions on ‘Help to Save’, and received their bonuses…., would indeed be quite receptive to ‘Help to Invest’.
I note that the full title of the Monevator link states cheap, simple, and secure.
Easy to understand and attractive to all depths of wallets.
Does anyone know if the recent Vanguard diversification change is related to the Space X IPO?
‘We’re writing to you because we need to inform you about some changes to one or more of our funds.
The changes won’t affect the fund’s performance or the fees you pay, and there’s nothing you need to do.
We’re updating the prospectus to reflect the increase in the fund’s diversification limit.
When is the change happening? 26 June 2026.
Why are we making this change?
UCITS rules allow a fund to invest up to 10% of its value in one underlying investment.
For funds that track an index, this limit can be increased to 20%. In exceptional circumstances, it can be raised to 35%’
@TI Absolutely spot on (by which I mean, I agree!) and very well expressed. Especially your last three paragraphs.
My concern about Andy Burnham – as well as the fact that absolutely nobody (OK, 25,000 people) voted for him – is that so far he seems to be a single issue politician. I quite like his devolution stuff actually, but have no idea what he thinks about anything else at all.
Nevertheless I too wish him well. I’m not holding my breath for the sort of radical change we desperately need though – unfortunately tinkering around the edges seems to be endemic to both mainstream parties.
Thanks as always for all the links, I haven’t read them all yet but the Use Your Wealth piece is fascinating. And having nodded along approvingly to the Stuart Kirk article in the FT, the Two Cents critique broke my brain.
@The Hare – it seems highly unlikely. SpaceX is a very small part of all the indices it has been admitted to. I believe this is a recent FCA rule change actually: https://www.eversheds-sutherland.com/en/global/insights/fca-removes-collective-investment-scheme-concentration-limit-for-ucits
@Trufflehunt @Boltt – agreed. I think we have the outlines of a good policy here. 2.5k was a first stab at a compromise between cost and an amount that’s significant for most people. If 5 million take it up in full, that’s 1.25bn/yr on the treasury. Quite affordable. Pay for it with a tax on consumer credits, payday lending, credit card lending and such stuff that keeps people in poverty.
Thank you for the links, much appreciated.
@Larsen
Over the last few days, in my studio flat, heavy shutters closed on the bay window, darkness, fan whirring…., my mind has turned several times to a 1976 summer afternoon. A Saturday, and I was trying to get some ‘fettling’ done on my sports car sat on the road outside my bedsit. The heat felt almost scalding. Having only recently come down from Scotland I was well used to cold, wet and miserable, but this was new to me. It was so hot that I could only manage about 15 minutes outside before I had to return indoors, gulp down some cold-ish lemonade, and lie down for half an hour. Then back outside, and repeat. That day is seared in my mind.
So, day before yesterday, sat in the dark, I wondered just how hot it actually had been in 1976. I searched and what came up was…
“The hottest day of all was 3 July, with temperatures reaching 35.9 °C (96.6 °F) in Cheltenham.”
Which is exactly where I was that day.
I remember it because, even in a hot summer, it was exceptional. That record has been busted several times over the last few days,. Certainly over the last few years, exceptional summer temperatures no longer seem to me to be exceptional, or like it was ‘back when I was a lad’.
Thanks for the links, only read a few so far but some good ones. “Heat pumps can also cool your home” article is interesting in the current climate. I was wondering about that the other day reading a telegraph article (search “Air conditioning torn from homes under net zero clampdown”) about Camden council planning department telling home owners to remove air con units. Would they be allowed a reversible heat pump? There’s a way to go with it but air to air heat pumps that can run in reverse for cooling or similar could be a solution….and what about the solution to the “fridge makes kitchen hotter in summer” problem. We’re still set up for a cooler climate, our domestic living setups need to change.
I let the cash in my S&S ISA build up and then reinvest roughly quarterly or more often maybe in lumps of £3k to £7k (div’s are lumpy). In 2025 I got about £35 cash interest from that so that’s about £7 for HMRC annually under the new regime, no great shakes. It’s not uncommon to do this due transaction costs with some brokers but do HMRC not consider this as “legitimate investment activity”? It hardly seems worth all the trouble especially given the other possible work-arounds you’ve pointed out. Anyhow, I’ve reached a point where I’ll be taking the income out as retirement spending is going up and excess cash has been run down. The tax free ISA income can now pay my monthly credit card bill, job is done…I don’t need to keep reinvesting it until the end of days 🙂
* The “Psyche” WER link: cognitive rigidity likely also strongly linked to (largely genomically determined) external (out group) threat perception and revulsion sensitivity:
https://www.penguin.co.uk/books/458410/why-we-think-what-we-think-by-munthe-turi/
There’s additionally a strong argument from physics that genuine ‘freewill’ is an illusion (although quite possibly a ‘useful’ one; from a Darwinian, gene level, survival and propagation perspective).
The strongest argument for representative democracy may be just fairness (having a say of sorts in decisions affecting you) not because the median voter is either rational, informed or competent enough to make the decision.
The ISA move is bizarre. Utterly incompetent if it was about encouraging investment so one has to think it’s something else. What is the average amount of annual interest I wonder? Are there are a load of negected accounts where automatic dividend reinvestment is not turned on? Strange, unless it’s the thin end of the wedge.
I agree with @marc that the lifetime is good for retirement – for basic rate taxpayers at least who are familiar with equities and who already max a workplace pension anyway – that includes me! – it’s niche but great if it’s for you. You can layer your drawdown plan- ie first isa, then pensions, then lisa.
The home buying side of them should’ve been tweaked for rising house prices, and not doing so was deliberate sabotage – it was Osbourne’s baby, and many people weren’t him. It still would’ve helped homebuyers who use it right, who are certain enough of buying that they don’t dip into the pot – was that a problem with help to buy? – possibly
Keeping cash in a s&s ISA is a peculiar choice from my perspective – why would you want to keep that much in liquid cash? Most of all though taxing it looks like more paperwork and hassle than the money it’s going to raise. Mostly just a stunt just to satisfy markets that they were doing “something” to recoup the money they were spending. Woo, tuppence!
#12 c-strong Thank you.
If the only thing that Burnham achieves is keeping Farage from the door of No 10 then he will be a hero in my eyes.
A Premier unelected his own political party and unelected by the country
What could possibly go wrong?
xxd09
My memory may be off (but not that far off) but only 8 PMs (of the 28 or so we’ve had in the 20th/21st century) have entered Downing St for the first time having led their party in the prior general election. MacDonald, Attlee, Wilson, Heath, Thatcher, Blair, Cameron, Starmer.
Burham’s elevation is the norm, not the exception.
Was it just me or was Kemi’s speech much better than Burnham’s. Not taking questions made him look weak.
Hopefully real conservatives and moderate Reformers will merge soon.
@Boltt — Kemi has grown into her role as party leader, and to my surprise I often find myself thinking she’s giving good speeches. A much better figure than a few years ago.
With that said I thought Burnham’s speech was good and he really has nothing to gain taking questions right now. He’ll be getting them around the clock in two weeks and nobody will remember this. Best to get his ducks all lined up and to try to hit the ground running given the pace of change, rather than being bumped into controversies or backtracking.
I also thought his speech was hopeful sounding, and might reach some of those moderate Reformers / frustrated blue wallers.
With all that said I can only second your final sentence. Time to kick the extremists into touch.
#22 @ZX: always worth remembering (and reiterating) that ours is a representative Parliamentary system where power rests collectively with the MPs and not with, or shared with, an elected President, unlike France or the US (thank goodness).
When the Government made up of, and commanding the confidence of a majority of, the elected MPs has a new ‘first’ Minister (in the PM) it does not follow (in our unwritten constitution) that there is a need for a GE to reselect all of the MPs.
One poll has just put Labour under Burnham ahead but, after 350 odd showing a lead for ‘Reform’, it’s just far too early to start hoping again. There’s nothing worse than having hope crushed. Better to mentally prepare for a Farage fiasco as PM come 2029, and then be pleasantly surprised if/when it doesn’t happen.