Now the government wants to mess with your Isa

Individual savings accounts work well, and are used and understood by millions. So why on earth would the government want to mess with them?

Only last week I wrote a post explaining why I think money saved into ISAs is safer from the government than money saved into pensions.It sounds perfectly sensible, but all it actually does is prove how even someone as consistently cynical as I am can underestimate the idiocy of governments.

According to the Sunday Telegraph, the Treasury has been doing a few of the things I anticipated last week. It has for example been "gauging opinion" on slashing the amount of tax free cash people can take from their pensions. But it has also been discussing dealing with what the paper calls the "concerns" about ISA millionaires, with a cap on the total amount one can save into an ISA of £100,000.

I can see how this might make sense from a numbers point of view. It must be maddening for HMRC to see people withdrawing capital and income from their ISAs entirely tax free (the tax on the money having been paid in full before they entered the wrapper) and it also fits nicely with the new trend for demonising anyone you can tag as remotely rich.

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But it is still a very bad idea. Why? Because everyone loves ISAs. Tens of millions of people save into them, understand them and trust them. Why would any government want to mess with a savings vehicle that works that well? If only they could just sometimes let a good thing alone.

PS I also wonder what's up the idea with capping of totals, rather than contributions. If you wanted to reduce the amount of money in ISAs (which you probably shouldn't) you'd surely be better to cap the amount going in (cutting the annual allowance or some such). Trying to cap the final outcome which is dependent on investment returns just leads to confusion and uncertainty. Just ask anyone trying to figure out the lifetime allowance system for pensions.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.