What caught my eye this week.
I don’t know about you, but I really miss that six-month spell last year when we all fretted about what was going to happen to pension allowances, inheritance tax, AIM shares, and all the rest of it.
Everyone knows financial planning is dull as dishwater. So why not living things up by throwing all the rules up into the air every few years?
That way we won’t get too complacent.
Instead: all the fun of the power-ups and banana skins in Mario Kart. Anyone might win – or lose!
Well rejoice because according to the Financial Times and This Is Money, financial firms have been lobbying the government to do away with – or at least severely do-in – the humble cash ISA.
The Financial Times reports that:
During a meeting last month, City firms lobbied chancellor Rachel Reeves to scale back incentives for cash Isas, arguing that the money would be put to better use if it were invested in the stock market.
Le sigh.
Cash cachet
Happily – though not exactly surprisingly, given it should be blindingly obvious to anyone – both articles found experts to defend the virtues of cash ISAs.
After all, here’s a rare popular financial product that anyone can understand.
Rates are now reasonable again. And the ISA shielding means there’s no returns lost to tax or time lost to paperwork.
This is what success looks like, and you can see why it turns the City green with envy:
Source: HMRC
Of course I know returns from equities and even bonds will very likely trounce cash over longer timeframes.
And ever since 2007 Monevator has been trying to help people understand how to invest more productively.
I also agree that boosting the flow of capital going into the London Stock Exchange would be helpful for Great Britain PLC.
But getting rid of one of the very few financial products that the average person is comfortable with – and upsetting the applecart yet again – is not a good way to encourage more investment.
How about instead educating people from school age about regular saving and compound interest, and what it might mean for their futures?
Or how about just not changing the rules on the whim of every other Chancellor, and instead letting us properly plan for the long-term?
Heck, how about politicians not inflict years of political chaos and ultimately economically damaging policies on the British public?
That way instead of flirting with recession every few quarters (see the links below) maybe we’d have enjoyed years of proper GDP growth and even some of the full-throated animal spirits that the Americans have seen.
And by the same token, maybe don’t bang on about ‘going for growth’ and then immediately inflict an employment-penalising kick in the arse for business as soon as your first budget comes around?
(Okay, and it’d be nice if we could re-roll the cosmic dice so we don’t have a pandemic and a war in quick succession next time.)
Honestly, for the average financially-confused person out there, just hoarding cash in the face of all this uncertainty seems very understandable to me.
Cash is not trash
If something must be done about this ‘unproductive’ cash – and to re-iterate, I’d prefer they just left well alone for a few decades – then I’d vote for carrots rather than sticks.
Let’s get rid of the ridiculous stamp duty on UK traded shares for starters. And scrap that pernickety £1.50 PTM levy on trades over £10,000 while we’re at it.
But something as fundamental as the cash ISA shouldn’t be up for debate.
Politicians who look forward to generous defined benefit retirement schemes need to understand that normal people in the brave new-ish world of defined contribution pensions face what’s notoriously the hardest problem in finance.
Given that is already a lot to cope with, some lasting stability might go a long way to encourage more learning about investing – and eventually coax more money out of cash and into other assets.
Get a real job
To be fair to her, Rachel Reeves doesn’t appear to be the instigator of any of this cash ISA dissing – though This Is Money does note ominously that:
The Chancellor did not dismiss the idea, according to a senior banker.
Really? Okay, then I’ll make the decision for her.
Dismiss it: we don’t need any more unforced errors.
Get on with sorting out planning or transport or a proper energy policy or anything big and bold that could actually improve our future writ large, rather than more fiddling with how we move this or that pile of the dwindling coins we’ve already got.
Cash ISAs are a solution to a problem – not the other way around.
Lord make my readers frugal, but not yet
On a totally unrelated note, ten years after I first sketched out a couple of ideas for ‘quirky’ investing-related T-shirts, we’ve finally got some Monevator merch coming your way!
Yes, you’ll soon be able to wear your love affair with investing on your sleeve – and in any colour too, so long as it’s Monevator-style black and white.
Got too much cash hoarded in your ISA? Then why not live large and spend a few tenners from it before Rachel comes a-calling…
This Shopify – um – shop of ours will also feature pointers to our favourite investing books on Amazon. Because you’ve got to eat your greens too, you know.
Anyway I’m going to rollout access to the shop in stages, so we don’t get overwhelmed* like in those Black Friday stampede videos that used to go viral a few years ago.
(What happened to those? I guess it’s all just standard behaviour nowadays?)
Moguls first – please watch your inboxes over the next few days for your teaser discount code!
And have a great weekend.
* I wish!
From Monevator
InvestEngine LifePlan portfolio review – Monevator
The benefits of living mortgage free – Monevator
From the archive-ator: Portfolio (basket) case study – Monevator
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Bank of England cuts rates to 4.5%, halves economic growth forecast – Sky
House prices hit record high in January ahead of stamp duty hike – BBC
ONS chief ‘very confident’ about rising health-related inactivity data – CityAM
Urgent action needed to ensure UK food security, report warns – Guardian
Musk effect? Tesla sales slump in five European countries – Reuters via Y.F.
New Zealand has launched a new long-term digital nomad visa – Forbes
‘Magical’ efficient market theory rebuked in passive era – Bloomberg via Y.F.
Man claims it was cheaper to fly 1,400 miles to Spain to buy olive oil – M.E.N.
Five years on, and Brexit is more unpopular than ever – Semafor
Products and services
What is the energy price cap and how is it changing? – BBC
How to save at the cinema every day of the week – Be Clever With Your Cash
You can get up to £3,000 cashback when you transfer your pension to Interactive Investor. Terms and fees apply. – Interactive Investor
Mortgage rates came down ahead of Bank Rate cut – This Is Money
Vanguard US just did its biggest-ever round of fund fee cuts – Vanguard
Open an account with low-cost platform InvestEngine via our link and get up to £100 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
What’s happening to car insurance prices? – Which
Two leading lenders cut buy-to-let mortgage rates… – Property 118
…but should landlords fix or risk a tracker mortgage? – This Is Money
Homes for sale for first-time buyers, in pictures – Guardian
Comment and opinion
Embrace boredom – A Teachable Moment
Tilting the odds in your favour – Novel Investor
Paying off your landlord’s mortgage can’t be right – The Big Issue
Meet the woman who lives without money – Guardian
Put in the hard work – Financial Samurai
The mortgage payment trick that can clear debts five years early – T.I.M.
The perfect level of wealth – A Wealth of Common Sense
On my own time – Humble Dollar
How to retire and not run out of money [Search result] – FT
Make decisions like an options trader – MoonTower
Buying things is usually stupid [Podcast] – 50 Fires via Apple
Naughty corner: Active antics
Investment trusts could return 13% p.a. for five years [Says trade body] – Trustnet
How investors can harness Trump-induced volatility – FT
Portfolio exits: a post-mortem – FIRE v London
Tonight we’re gong to stonk-punt like it’s 2021 [Search result] – FT
Trading our dark triad overlords – Paul Podolsky
Has Michael Saylor’s ‘infinite money glitch’ run into a hitch? [Search result] – FT
Going beyond Buffett – The Leading Edge
Kindle book bargains
Fooled by Randomness by Nassim Taleb – £0.99 on Kindle
The Price of Time by Edward Chancellor – £0.99 on Kindle
Edible Economics by Ha-Joon Chang – £0.99 on Kindle
Taxtopia by The Rebel Accountant – £0.99 on Kindle
Environmental factors
How climate change could upend the case for home ownership – ProPublica
Record January warmth puzzles climate scientists – BBC
In pristine parts of the Amazon, birds are still dying – Guardian
Scenic loch becomes magnet for Scotland’s plastic waste – BBC
What are small modular nuclear reactors and why do we want them? – Guardian
Robot overlord roundup
No long hiring junior or mid-level coders [Tweet] – Savil Navingia via X
Why employees are smuggling AI into work – BBC
How to invest for a post-AGI world – Of Dollars and Data
Companion asks interesting questions about our relationship with AI – The Conversation
DeepSeek might not be so competitive; reports finds $1.6bn spend – Tom’s Hardware
ChatGPT’s Deep Research creates reports from hundreds of sources – Engadget
We’re already at risk of ceding our humanity to AI – Lit Hub
Leading AI company warns applicants not to use AI – FT
US off-the-deep-end mini-special
Explaining to a child why tariffs hurt everyone – Roger Lowenstein
Garbage information is killing democracy – Garden of Forking Paths
How chaos became American’s economic strategy – Kyla Scanlon
What happened the last time a president purged the bureaucracy – Politico
Can anyone stop President Musk? – The Verge
Off our beat
Who owns London? – The Standard
The books that ruin your life – The New Republic
Drone-on-drone warfare in Ukraine – Ars Technica
What we can learn from a dog’s way of looking at the world – Lit Hub
The mystery of why Covid-19 seems to be becoming milder – BBC
What if you never come down? Postcards from 1990s nightlife [Photos] – Guardian
Scientists crack the perfect way to boil an egg – Guardian
And finally…
“To my relief, most of the attending senators seemed to appreciate that promoting global financial stability was in the interest of the United States.”
– Ben Bernanke, The Courage to Act
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