Rachel Reeves wrecked winter fuel and state pension – and now your ISA | Personal Finance | Finance
Remember when winter fuel payments were a simple benefit for retirees? Reeves quickly put a stop to this. First he scrapped it for 10 million retirees. Then he made a giant U-turn and made everyone pay, but took it away from the better off. Everything is so complicated now that no one can follow it. Unfortunately, this wasn’t a one-time thing. This is Rachel Reeves’ plan. Take something that people generally understand and break it down. Then reassemble. Bad.
He did the same for state pensions. Next year, the new state pension will rise above the frozen personal allowance of £12,570 for the first time and become taxable. Reeves came up with a way to avoid having to pay taxes only on those receiving a government pension. Although it seemed logical for half a second, it has now turned into a complete disgrace that is of no use to almost anyone. It created similar havoc in the job market.
The unemployment rate in England has been low for years. Reeves then imposed £26bn of extra National Insurance on employers and lowered the payment threshold, while also delivering significant increases in the minimum wage. Conclusion? Youth unemployment has peaked. He destroyed the hopes of an entire generation. The answer? Create a subsidized youth package that probably won’t create even a single decent job.
This is the model. Destroy something that works pretty well, then replace it with crooked-eyed Whitehall candy that no one understands. He has recently turned his attention to ISAs. Predictably, chaos ensued.
Before Reeves intervened, savers received a simple annual allowance of £20,000 which they could split as they wished between Cash ISAs and Stocks and Shares ISAs. ISAs still needed some gentle simplification. Instead it added another layer of confusion.
Firstly, it reduced the Cash ISA allowance to £12,000 for those aged under 65 in a bid to nudge savers into shares and kept the Stocks and Shares ISA at £20,000 for everyone else. This will come into force next April. In principle, I agree with this idea. Young savers should invest more in stocks because long-term stock market returns often outpace cash.
But Reeves handled this in the worst way possible. Many forget that the Stocks and Shares ISA platform allows investors to park money in cash while they decide which stock or fund to buy. So he decided to impose a 22% tax penalty on anyone who did this.
It didn’t take long for savers to spot a loophole in his stupid rule. They can first max out their Cash ISA at £12,000. Then invest 1p in shares and transfer the remaining £7,999.99 of their annual ISA allowance into low-risk ‘money market’ funds. These can be purchased within a Stocks and Shares ISA and invested in “cash-like instruments”.
Reeves didn’t see this coming. There was no one in the Treasury either. And now they’re stuck. So are banks, building societies and investment platforms. They’re not sure what systems they’ll need to install by next April.
So where does this leave savers? With an ISA regime that is much more complex and confusing than before. A purportedly simple savings product now comes wrapped in warnings, workarounds, and technical pitfalls.
As the Express recently revealed, more than half of Brits are unclear about ISA changes and risk missing out on thousands of tax-free savings as a result.
Reeves didn’t just destroy our welfare system, state pensions, job market, and savings culture. It has crushed growth, lost control of borrowing and risks sending us off the fiscal cliff.
The ISA disaster is just the latest example of the destruction it has brought to our country. And he’s not done yet.
