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