Is the Treasury planning to cap Isa savings?
The Treasury could be considering capping the amount that can be held in Isas, according to reports in the Telegraph newspaper.
The government is said to be looking into the popular tax-efficient savings vehicles amid concerns about an increasing number of ‘Isa millionaires'.
The amount that can be saved in an Isa has grown from £7,000 a year when they were launched in 1999 to £11,520 in the current tax year.
While the maximum someone who had made the full use of the allowance each year since 1999 could have put in Isas is around £130,000, the Telegraph says wise investment decisions and the effects of compounding could mean that some pots are now worth more than £1 million.
While the number of people with pots amounting to that much is thought to be very small, those with pots in the region of £100,000 could account to 2% - or tens of thousands - of Isa savers, according to the newspaper.
While the Treasury has denied it is planning to introduce a cap, some pensions experts are already shuddering at the thought of any such intervention.
Patrick Connolly, a financial planner at Chase de Vere, told Moneywise: "It is well known that as a nation we aren't saving enough to provide for ourselves adequately in retirement. The general population has a wide distrust of pensions, due in large part to the constant meddling and rule changing of politicians.
"While people don't trust pensions, they do trust Isas and so it unfathomable that the government would want to change something which is continuing to gain momentum and is clearly working."
He added: "While £100,000 sounds like an aspirational cap for many people this isn't necessarily the case, especially for those who get into the savings habit early. An Isa fund of £100,000 would provide an annual income of less than £100 each week in retirement and also remember that many people are using Isas as a means to pay off interest only mortgages which could be considerably greater than £100,000."
Andrew Hagger of MoneyComms.co.uk also voiced his concerns for the savers. "I think it would be another blow for an already struggling savings market. The £100,000 limit will only hit a minority of savers but it's a slippery slope once the government starts tinkering with limits and allowances."
Connolly added: "Hopefully these will prove to be little more than scare stories. If not then the future financial outlook for those in the UK, which is already pretty concerning, could get a whole lot worse."Is the Treasury planning to cap Isa savings?
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.