Why not let the people decide?
by Dr. Ros Altmann
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The past few years have been a nightmare for savers. With near-zero interest rates and inflation overshooting the Bank of England’s two per cent target, the value of their savings has been whittled away. To add insult to injury, the meagre interest they earn is taxed too.
Savers approaching, or already in, retirement are finding the money they set aside to live on in later life is not delivering the income they need.
National Savings used to offer attractive tax-free bonds but they proved ‘too popular’ and disappeared.
Now the best option for tax-free savings (outside a pension) is the ‘use-it-or-lose-it’ £11,280 annual Isa allowance. But the rules allow only half for cash Isas. The other half must go into stocks and shares, or it is lost. This is unfair on savers in later life who cannot afford to gamble with their nest egg.
Why should the Government tell them how to save? It should be up to individuals to decide what assets are best for them.
It is hard to fathom what the rationale for these restrictions is anyway. Why not let people choose whether to invest the £11,280 in cash or stocks and shares, or both?
Allowing an extra £5,640 a year into tax-free cash savings would provide a boost to hard-pressed savers. Just like an interest-rate increase, it would improve their income.
This change would be popular. A recent Saga poll showed two-thirds of over-50s favoured saving their whole allowance in cash.
Abolishing old-fashioned, arbitrary Isa restrictions would provide relief for savers and go some way towards compensating for the damage done by policies designed to help borrowers and banks.