Make ISA's Taxable!

Bitstring , from the wonderful person AnthonyL said

I would guess that 75%+ of 'ISA Savers' only save in a cash ISA anyway. Those are not uk.finance readers, so don't bother to poll here - those are people like your mum or grandmother, who regard shares with deep suspicion.

If the government wants to encourage them to save, then we need higher interest rates, &/or a government subsidy on money put in - like the tax credit on money going into a SIPP .

In message , GSV Three Minds in a Can writes

Too bloody true, but my pension deficit is made worse by falling shares. I sold my last shares when I reached 65, after that age you can't afford to wait until they recover in order to sell.

I don't want the earth, 5% tax free would be fine with me.

I've long had this idea that tax on savings interest should only be paid on the proportion over the inflation rate.

So inflation = 3%, interest = 5%, tax is paid on 2% of interest. And at the moment of course, few would pay tax.

Not sure what happens with deflation though...

, &/or a government subsidy on money put in - like the tax

The 40% tax benefit I got on a one-off pension contribution some 11 years ago was a waste of time. If I'd simply paid the tax, and put the remaining

60% in a deposit account, it would be worth more than the 100% is now. And I could spend it!

So you're comparing a (presumably) equity investment in a pension with a cash investment outside a pension?

It's FA to do with pensions, you can have a cash SIPP.

Bitstring , from the wonderful person Andy Pandy said

Yep, I can't understand why people who won't touch shares, or a stocks & shares ISA are quite happy to punt on equities via life policies or pension plans.

But back on topic - if the government wants us to save (in an ISA) they need to fix the risk/reward balance. Right now cash ISAs are not keeping up with their preferred CPI index.

Of course the government is deeply confused anyway .. they =say= they want us to save, but they really want us to continue to borrow beyond our means to buy cars, houses, holidays, whatever, to keep the car factories, builders, and travel agents working away merrily.

And with good reason so it would seem. What was the mantra? "Only one 5 year period since the war that the FTSE hasn't beaten savings".

In message , GSV Three Minds in a Can writes

They are stupid, aren't they? ;-)

The modest company pension I have been drawing for the last 17 years has certainly exceeded the contributions I paid for 21 years.

The scheme is in deficit . The company are paying a huge extra amount in this year .

Not everyone will be as lucky in collecting a FS pension in the future, I accept.

Bitstring , from the wonderful person AnthonyL said

There are now several more 5 years period, and even a few 10 year periods, on offer. However if interest rates continue to clunk along the bottom, Shares could yet be a better bet again ..

To get the benefit of tax-deductible contributions, you have to pay into some approved pension scheme where you have little control of how the money is invested.

I don't particularly remember being told about cash alternatives. And I wouldn't have been bothered anyway because even at 0% fund growth over ten years, I would still have achieved 67% growth on my actual investment due to the tax contribution. No-one foresaw, or even considered, a 25% drop in value, not over that long a term.

At one point the fund was actually 30% up, but I couldn't get my hands on it because I hadn't reached the minimum retirement age.

My only other ventures into risky investments were: a PEP, which was 10% up after six months (good) but was 10% down after twelve (bad). And an endowment mortgage, where the growth of the endowment fund, after 8 years, was exactly 0%, about the same as cash stored in a shoebox, and would never have paid off the mortgage.

Now I stay clear of (a) pension schemes (where you lose control of, and access to, your assets) and (b) stocks and shares or any sort of investment that puts your capital at risk. I just haven't got the nerves for it. It's bad enough just having money in a deposit account.

And if it bankrupts the company in the future?

R

In message , RobertL writes

There are schemes with deficits many times larger...

Rubbish. SIPPs have been around since the early 90's at least. As the name implied, they are Self Invested, ie you choose where to invest. You can invest in cash, you don't have to buy equities.

Plenty of people foresaw it. See the uk.finance archives.

I guess your pension was mainly invested in UK equities. Most of mine are foreign equities and all are well up over the last 10 years or so, even with the recent falls. The UK ones are down.

But you could have converted in into cash.

Endowments have always been a rip-off...

There are restrictions, but these can be advantagous, eg you can't be denied means tested benefits if you have 100,000 in a pension fund, but if you have

100,000 in a deposit account and lose your job in the recession you'll be expected to use your old age savings to support yourself now.

Your capital is at risk whereever it is. If QE (aka printing money) is a success it could cause high inflation. Your capital could become heavily eroded by a bout of high inflation, quite possibly more than the 25% drop you suffered on your pension.

Make ISA's what taxable? Please learn to post in English!

OK but why wasn't I aware of that? Pensions seem now fantastically complicated compared to just putting money in the bank or buying property. And I could never get my head around SIPPs.

It seemed more like these products were designed to generate income for pensions companies by exploiting people like me who had little idea what they were doing. My company sent me enough glossy literature over the years that would have filled a shelf, if I'd kept it.

In that case a lot of people will be in the same boat.

Because you didn't do any research? Because you didn't get a decent IFA?

Buying property is complicated, or rather working out the financial gain/loss from investing in property is complicated. Search the archives, we've had some incredibly complicated maths to determine the gain/loss from owning property.

Google is your friend. There's loads. This one gives a reasonable basic explaination:

As do practically every other business. If you don't put in your own research before buying any product then prepare to get ripped off. If you knew nothing about cars would you buy one without getting advice from someone who does, or pay the AA or someone to check it out? Or would you rely on the saleman selling the car to give you advice?

Yes. But probably not those with shares, as a recovery would likely see share prices exceeding inflation.

And a lot of pension fund cash funds have lost money, either because they put it in Icelandic banks, or because they invested directly in mortgage bonds.

In which case they'd have got exactly the same protection as a normal deposit account with the same bank, ie the first 50,000.

Then it's not "cash".

That protection is per fund, not per investor as the account is in the name of the fund.

No, but a lot of cash funds still invested in them.

Hmm.. this is more complicated than I thought.

If it's a "cash SIPP" the account should be held in the name of the individual plan, so the full 50k compensation is available per individual. Much more if it's spread across several banks.

If it's held in the provider's client account then there's some uncertainty...they suggest checking with the provider... HL for instance claim that each individual is entitled to 50k.

But in any case, we've seen that the government haven't allowed UK banks to go bust, and have even compensated investors in foreign banks..