Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. Welcome to Meron Talks
Speaker 1: Your Money, the personal finance edition of Merin Talks Money.
Speaker 1: In these bonus podcasts, we talk about the best strategies
Speaker 1: for making the most of your money. I'm Merensumset Web
Speaker 1: and with me senior reporter, a money dissult author John
Speaker 1: Stepeic Hi John hi Elm. Now listen, John, just before
Speaker 1: we came on air, you gave me one of the
Speaker 1: best pieces of personal finance advice I think you've ever
Speaker 1: given me. So I think we should share it because
Speaker 1: you know the way we do this Sometimes we record
Speaker 1: from home. I'm at home.
Speaker 2: I'm in Scotland.
Speaker 1: It's zero degrees, it's sleeping outside, but little fan heater
Speaker 1: by my feet. I have to turn it off because
Speaker 1: it ruins the sound. I'm complaining about this because I'm
Speaker 1: wearing an outdoor coat inside. And John says, what did
Speaker 1: you say, John?
Speaker 2: I said you should buy on those infrared panel heaters because,
Speaker 2: believe or not, they actually work a lot better us
Speaker 2: because I've tried a lot of heaters in my freezing
Speaker 2: cold study. Don't tell Jimmy Dooming. I'm working from home
Speaker 2: today and it's great. It's great, and it's silent, completely silent,
Speaker 2: and it's a lot better than those oil based ones
Speaker 2: as well, just gives off a much more I kind
Speaker 2: of dryer heat. So yeah, I know you should definitely
Speaker 2: get one.
Speaker 1: There you go. Listeners, don't say you don't get proper
Speaker 1: personal finance tips on this podcast and direct from both
Speaker 1: of our fraising cold offices. Thank you, John. Right now,
Speaker 1: this week we want to talk. We want to talk
Speaker 1: about something else apart from heating. We want to talk
Speaker 1: about cash isis now readers of my newsletter, which I
Speaker 1: think all of you should be and if you're not,
Speaker 1: you really should be by now. It's got lots of
Speaker 1: great stuff in it, including links to John's great work. Anyway,
Speaker 1: if you get that, you will have some insight into
Speaker 1: how I feel about the conversation around cash ices at
Speaker 1: the moment. But if you don't know what's going on here,
Speaker 1: rumors are swirling all over the place that the Chancellor
Speaker 1: Rachel reads her of the DODGYCV is thinking about stripping
Speaker 1: this very popular savings there of its tax benefits. So
Speaker 1: is this the wake up goal that some of you
Speaker 1: might need to actually use up? That is reliance before
Speaker 1: the fifth of April, and is the shakeup a good idea?
Speaker 1: So I think the first thing we're going to do here, John,
Speaker 1: is we're going to actually say what is a cash isa?
Speaker 1: How does this work? And as things stand at the moment,
Speaker 1: should you have one?
Speaker 2: Yes, you can put up to twenty grand a year
Speaker 2: in a cash iSER as part of your overall eyeser allowance. Okay,
Speaker 2: so you get twenty grand to use as you want,
Speaker 2: and all of it can go to cash if you want.
Speaker 2: When it's in there. You don't pay tax on interest.
Speaker 2: And in the old days that didn't really matter because
Speaker 2: you weren't getting paid any interest. But now it's actually
Speaker 2: really important to protect your cash savings from interest tax
Speaker 2: if you can, because basically paying people are paying a
Speaker 2: lot more because interest rate is a five percent as
Speaker 2: opposed to zero percent.
Speaker 1: I love your definition, John, of the old days, well
Speaker 1: twenty twenty one, right, how did this happen? For me?
Speaker 1: The old days is the nineteen seventies. For you, the
Speaker 1: old days is twenty twenty. Well, listen, the reason this
Speaker 1: all really matters is that you get you still get.
Speaker 1: I'm pretty much every tax allowance in the world has
Speaker 1: been taken away, but you do still get what they
Speaker 1: call a personal savings allowance. So if you're a twenty
Speaker 1: percent taxpayer, you can get one thousand pounds worth of
Speaker 1: interest before you start paying tax on it. If you're
Speaker 1: a forty percent taxpayer or a higher taxpayer, you can
Speaker 1: get five hundred pounds of interest. If you're a forty
Speaker 1: five percent taxpayer, you are obviously the evil rich and
Speaker 1: you get nothing. Just so you're absolutely clear, evil rich,
Speaker 1: nothing for you. There's also something called the starting rate
Speaker 1: for savings, which is yet another one of those tapered allowances,
Speaker 1: but does allows you have no other income of any
Speaker 1: kind whatsoever to goet to think it's five thousand pounds
Speaker 1: isn't it an an interest tax free? So if you
Speaker 1: have very very little in the way of savings, and
Speaker 1: you do not expect to have more in the way
Speaker 1: of savings, and you are perhaps not even a taxpayer,
Speaker 1: then you might look at a cash iceer and say, well,
Speaker 1: what's the point. There's nothing in it for me? Right, Yes,
Speaker 1: you may, it's just complication, And in the past I
Speaker 1: might have agreed with you, because in the past it
Speaker 1: was true that very often the interest rates on cash
Speaker 1: isers were lower than the interest rates on actual savings
Speaker 1: accounts because they can get away with it, right, Yeah,
Speaker 1: makes sense. If you can get away with it, then
Speaker 1: that's what you do. But at the moment, actually they're
Speaker 1: more equal and effective. I was just looking online before
Speaker 1: we started talking, and it looks like you can actually
Speaker 1: get more on an instant access cash icer than you
Speaker 1: can on an ordinary savings account. So you need to
Speaker 1: look at all these things when you're talking about whether
Speaker 1: whether a cash icer is the right thing for you.
Speaker 1: But if you have a reasonable amount of money, as
Speaker 1: John just said, you've really got to get a cash isico.
Speaker 1: So you know, at the moment, if you've got if
Speaker 1: you're a lower rate tax payer, if you've got twenty
Speaker 1: thousand pounds in savings, you're already hitting up against that allowance.
Speaker 1: If you're a higher rate tax payer, ten thousand pounds,
Speaker 1: But have you hit tap against that allowance, wouldn't it? Yes,
Speaker 1: about ten thousand pounds would have you hit up against
Speaker 1: the cash saving So if it's any of those things
Speaker 1: and you have cash, you really need to have a
Speaker 1: cash ice. But while it might work for us, does
Speaker 1: it work for Rachel Reeves? And there's the other question. Now,
Speaker 1: there is a huge amount of money saved in ices.
Speaker 1: I mean massive. This is one of the most popular
Speaker 1: personal finance products we've ever had in the UK. So
Speaker 1: the latest numbers twenty twenty three show twelve point four
Speaker 1: million adult iss subscribed to The total market value then
Speaker 1: of these ices is seven hundred and twenty five point
Speaker 1: nine billion. But here's the interesting bit. In that year,
Speaker 1: around sixty three percent of the money that went into
Speaker 1: ISS stayed in cash ices. But if you look at
Speaker 1: the total value of the ices, while the majority of
Speaker 1: the money that is going in is going into cash ices,
Speaker 1: the eventual value is the other way around. So sixty
Speaker 1: percent that is going in they're staying in cash isceers.
Speaker 1: Look at the result, sixty percent of the market value
Speaker 1: of all ices shares a forty percent of cash, which
Speaker 1: is telling you that if you put your money into
Speaker 1: the market, you get a bigger return longer term than
Speaker 1: you doing cash. Now we know that, we know that,
Speaker 1: but it's interesting to see it here in these bare numbers.
Speaker 2: Right yeah, And I mean I think somethings people need
Speaker 2: convincing because it's one thing we know it. But one
Speaker 2: of the reasons that the cash iszers get so much
Speaker 2: traction here is because people just don't trust the stock
Speaker 2: market and this country and the way that they do
Speaker 2: in the US for example.
Speaker 1: Okay, so here's the thing. All that money pouring into
Speaker 1: cash ices Richeal is pure. She is looking for cash everywhere,
Speaker 1: looking for a way to deal with her growth mission
Speaker 1: and thinking to herself, how do I get my hands
Speaker 1: on a big pile of cash to push into my
Speaker 1: growth mission? And I, you know, usually we say pensions, Well,
Speaker 1: why do you know, why do you want pensions? Because
Speaker 1: that's where the money is. All this cash is just
Speaker 1: sitting there in Isis. We may agree, you and I
Speaker 1: that maybe people shouldn't hold very much cash in an
Speaker 1: I said, when we go right back to personal finance,
Speaker 1: we say how much how much cash did you hold?
Speaker 1: And normally we top out at six months?
Speaker 2: Right, Yeah, for what can people sex months? Definitely?
Speaker 1: Yeah, for older people probably a lot more. But nonetheless,
Speaker 1: if you've got more than that, possibly you should be
Speaker 1: in the market anyway. If you should be anyway, And
Speaker 1: Rachel Rives were quite like all their money in the
Speaker 1: market because it might kickstart the the stock market in
Speaker 1: some way, because in the DoD rooms so things have
Speaker 1: got better recently, but still not great. It could do
Speaker 1: with a massive inflo cash. So in a way I
Speaker 1: hate to approve of anything where normally we do nothing
Speaker 1: but disapprove on this podcast, but in a way, clamping
Speaker 1: down to a degree on the cashire so wouldn't be
Speaker 1: an altogether bad idea, would it.
Speaker 2: Yeah, there was talk from one of the carb the
Speaker 2: manisters who used to be Tanker once upon a time
Speaker 2: about putting in a kind of lifetime allowance on ises,
Speaker 2: a bit like the old lifetime allowance on pensions, and
Speaker 2: I think that would be a very stupid idea, but
Speaker 2: it's Yeah, there may be an argument for putting a
Speaker 2: cap on the amount that you can hold in a
Speaker 2: cash eyeser, because looking at it from a non punitive
Speaker 2: point of view, I suspect there probably are a lot
Speaker 2: of people in the UK who are holding more cash
Speaker 2: than is sensible or good for their long term finances.
Speaker 2: That is something that we should be looking to address.
Speaker 2: And yeah, you know, you could be addressing the way
Speaker 2: things like oh, personal finance education at schools and all
Speaker 2: that nonsense, But actually probably an easy way to address
Speaker 2: is to say that, well, okay, you can only have
Speaker 2: this much and this much would be a reasonable emergency stash.
Speaker 2: So six months of the say the median post tax
Speaker 2: income something like that, and then above and beyond that.
Speaker 2: If you want the tag speak, you have to put
Speaker 2: your money into stocks, preferably UK list in store.
Speaker 1: It's complicated though, capping it like that. And I never
Speaker 1: really approved caps because because of inflation, because of interest rates,
Speaker 1: because of all this kind of thing. You know, the
Speaker 1: big recommendation, I think it's that I never moved them.
Speaker 1: I think it some resolution foundation that has said that,
Speaker 1: you know, ISO cash savings should be capped at one
Speaker 1: hundred thousand pound. Sure, who you know, Maybe.
Speaker 2: It wasn't cash savings, it was the total, that's what
Speaker 2: was it.
Speaker 1: Stupid, Okay, that's as much extra stupid, don't care, they're idiots.
Speaker 1: We'll push that into one side. No thank you. But
Speaker 1: you know, if you put on a cap like that,
Speaker 1: say you started at let's say you started at fifty thousand, right,
Speaker 1: then you have inflation and you have interest rates. Let's
Speaker 1: say inflation goes mad in the ukg is I mean,
Speaker 1: it could happen, right, and suddenly you've got inflation at
Speaker 1: ten percent and interest rates at twelve percent, because remember that,
Speaker 1: in an ideal world you're making a real return on
Speaker 1: your money, and suddenly that fifty thousand everyone runs over
Speaker 1: it in ten minutes. So a cat is not a
Speaker 1: very good idea. But maybe a reduction in the amougam
Speaker 1: the cash aswer in the stocks and shares I say,
Speaker 1: used to be separate allowances, remember that.
Speaker 2: Yeah, that's a good point.
Speaker 1: Was that the worst thing in the world.
Speaker 2: That is going back to the old days?
Speaker 1: What's the real all this?
Speaker 2: That would make sense? Yeah, to reduce the annual.
Speaker 1: Loans, take it back to two things, and at the
Speaker 1: same time dump all the other iceis, which we're not
Speaker 1: very pleased with. You know, the the lifetime I said,
Speaker 1: I can't even remember. All the other ones are called
Speaker 1: the innovative finite eyeso, all these confusing ones that make
Speaker 1: the ice a landscape difficult. Go back to cash and
Speaker 1: stocks and shares, and perhaps we could stop calling it
Speaker 1: stocks and shares because no one knows what that means either,
Speaker 1: do they?
Speaker 2: Oh? Yeah, no, it means the same.
Speaker 1: Hang, yeah, exactly one day, one day, we're going to
Speaker 1: do a whole podcast of a difference between a stock
Speaker 1: and a share.
Speaker 2: Take a second, intriguing piece of financial history, and it's
Speaker 2: it would I don't think you're seeing that long.
Speaker 1: And then you could just have the cash icer and
Speaker 1: the investment ISO.
Speaker 2: That would make sense.
Speaker 1: In fact, we could go all the way with this.
Speaker 1: We could have the cash icer and the brit investment
Speaker 1: icer and nothing else. Job done. Listen, There's one more
Speaker 1: thing I want to say on ices, and one reason
Speaker 1: why maybe change isn't coming particularly fast. The brilliant thing
Speaker 1: about ices is that they do not have to be
Speaker 1: declared in any way to the tax man. These don't
Speaker 1: go in your self assessment form. Nothing has to happen.
Speaker 1: There's no admin in an iSER. This is why I
Speaker 1: love an ICER. You put the money in the iSER
Speaker 1: and you have to do no admin around this at all.
Speaker 1: There's no trying to get tag certificates, no trying to
Speaker 1: check capital gains, nothing, It's just admin free. And for me,
Speaker 1: anything admin free is brilliant. Even if I had the
Speaker 1: biggest personal savings allowance in the world, I'd probably still
Speaker 1: have an iSER, so I never had to get a
Speaker 1: certificate and declare to the tax man because it's so boring. Now,
Speaker 1: if you get rid of the cash icer or you
Speaker 1: reduce it down to a fairly minimal amount, and people
Speaker 1: want to hold more cash. You aren't going to drag
Speaker 1: I think a whole of the people into the self
Speaker 1: assessment system.
Speaker 2: Yeah, I mean the government wouldn't see that as a problem,
Speaker 2: but we do.
Speaker 1: Well, they might have to, you know, hire some more people.
Speaker 2: Think they would see that as a problem. It's funny
Speaker 2: they don't make hire in more tax people because you
Speaker 2: can view that as an investment because they collect extra tax.
Speaker 1: Yeah.
Speaker 2: Yeah, there's a definitely argument for it. The problem is
Speaker 2: anything you see there's an argument for this stuff, a
Speaker 2: politician goes ahead and pushes it to the most ridiculous
Speaker 2: extent that it can. So from that point of view,
Speaker 2: that's why I would be worried. But if you did
Speaker 2: that along the lines of what we are talking about,
Speaker 2: then that would be fine.
Speaker 1: I suppose. The key thing is that if there were
Speaker 1: to be a change to cash isces, it's very unlikely
Speaker 1: they'd suddenly say, oh, you people with two hundred grand
Speaker 1: in cash in your eyes, you're going to have to
Speaker 1: take one hundred and fifty out of it. Doesn't work
Speaker 1: like that, So what you have in already will probably
Speaker 1: be safe inside the wrapper. So remember that you can
Speaker 1: put in twenty thousand pounds every year. Yeah, but in
Speaker 1: twenty grand. Now if you haven't already, you can put
Speaker 1: in another twenty ground at the beginning of April. Suddenly
Speaker 1: you've got forty thousand pounds protected inside a cash ice
Speaker 1: for acount, assuming that it's cash that you want to
Speaker 1: That's just to say, this is an extremely generous system.
Speaker 1: Already you can get a lot of cash in. I
Speaker 1: think that's what I need to say on isis.
Speaker 2: And it's just what's doing. It's worth doing.
Speaker 1: It's worth doing. You know, at the moment, pretty much
Speaker 1: all your money is going to disappear in tax quite soon.
Speaker 1: So anything you can protect protect us soon as you
Speaker 1: can write anything else to add to isis John.
Speaker 2: No, I think that's a perfectly cheerful note to you.
Speaker 1: Right, Okay, any more tips on heating, because I'm just
Speaker 1: off to buy one now. Any favorite brands?
Speaker 2: Actually, No, it's a big weight pinel he That's all
Speaker 2: I can say about.
Speaker 1: Okay, it doesn't sound very attractive, but I guess that's
Speaker 1: the least of my worries.
Speaker 2: Well, it's bigger than a fine here, but it's not as.
Speaker 1: Noisy Okay, all good tips. Thanks John, Thanks for listening
Speaker 1: to this week's Marin Talks to Your Money. If you
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Speaker 1: email is Merinmoney at Bloomberg dot net