I'm certainly not going to bother repeating the details of the budget last week which I feel was very much a non event. With the austerity that is being inflicted on the U.K., the job losses in public services, the reductions of payments to genuinely ill and disabled people, along with the dismantling of the NHS, I find it insulting for the government to believe that we will accept the announcements made this week, as portraying a full picture of the governments financial objectives for the near future.
Increasing of the minimum income tax threshold is good news for working people, but due to other factors which the government has allowed to go out of control, any tax benefits provided are likely to be wiped out immediately by other rising costs which the government constantly talks about, but repeatedly fails in actually taking any necessary action. These costs involve the rising costs of rent to private landlords, rising energy prices due to exploitation by private companies and the rising costs of credit services throughout the financial industry from the credit card companies to the pay day loan companies.
What appears to have taken centre stage was the changes to ISAs. It is true that they have not been giving very good returns lately. But the fact is, the priority that these changes have been given by the Chancellor probably has as much to do with vested interests in the finance industry as it does with allowing savers to invest more money in a tax free investment......
Money invested in ISAs is invested in the stock markets to buy stocks and shares of businesses, to buy government bonds and other financial products. This is regardless of whether the money is invested in a cash ISA or a Stocks & shares ISA. The difference is that the cash ISA uses a fixed interest rate to generate the return where as a Stocks and Shares ISA is directly invested in Stocks and shares and will be directly affected by rises and falls in prices of stocks and shares. Cash ISAs pay less in general, but this also means you should never actually lose any of your investment. The term Cash or Investment ISA is slightly misleading. The money will still be invested regardless of which ISA you choose.
The problem is, what I am about to say is not going to make much sense to a lot of people who are receiving less than 1.65% return on their ISAs...........Stock market activity has now increased to pre-financial crisis levels. The buyout industry has also taken off and is also now at levels prior to the crisis. All of this involves the use of invested cash. Billlions and billions of dollars worth of it........But people providing that cash are not currently being rewarded. The new rules which allow more money to be put into ISAs is not going to make a great difference because returns till now have continued to fall. Any real benefits will only begin when the interest rates eventually rise.
The fact is that whilst some relatively wealthy savers may benefit from these changes all be it in a small way, I feel the biggest winners will be the stock markets as the press and media over the last few days has been giving free advertising for the banks in the use of ISAs. More people will no doubt be using them over the next months. Money invested will accelerate even beyond their use which has already been increasing rapidly over the last few years.
But there are a few other issues concerned with investments in ISAs.....
1......Investments in ISAs has been rapidly increasing over recent years. This may well mean that the stock markets have been benefitting from an increasing amount of cash being made available and also the government will have benefited from additional available cash to buy up their government bonds!.........Cash which would not have been available if the savers had invested their money in property for example! ISAs have probably contributed to the very slow recovery of the house buying market over the last few years. Also to the construction industry who may have been building more of those houses had there been the finance provided to pay for them. ISAs it seem have given the banks an excuse to abandon the housing market in favour of the easier returns provided by gambling on the stock markets.......
.......So are ISAs causing a bubbles in the stock markets? ...
.......Are ISAs discriminating against more ethical, job creating investments?!....
2......We know a few people have been warning about a house price bubble which is developing mostly in the South East of England which many people have blamed the 'Help to Buy Scheme' for contributing to.......
.......But what has not been mentioned by the new governor of the Bank of England, is that there is no doubt bubbles being created in the stock markets. Various assets have been sold off at what seem to be optimistic prices and there are now queues of businesses waiting for their IPOs (Initial public Offering) onto the stock markets.......... Also investments in corporate bonds makes it to easy for a business to get into vast amounts of debt which will not be an apparent problem until the bonds reach maturity. In that time the business and the market it competes in could have changed drastically and it may be that the business will not be able to pay off it's debts on bonds when they reach 'maturity'...'Maturity' being the date when the loan has to be paid back in full. This will of course affect people with ISAs invested in those companies.
3......Savers with ISAs are hoping for a rise in the interest rates being paid to them on their investments. Unfortunately businesses who start paying higher interest rates on debt which has been taken on whilst the interest rates are low will be affected when the interest rates rise....The cost of many of these businesses will rise substantially.....Much debt has been taken on by private equity companies and hedge funds and by corporations for the pure reason that the interest rates were attractive. It has generated business for the investment banks and the stock markets. Lots of money has changed hands on completion of deals. Bonuses have been paid out...............But what happens next remains to be seen......
May be we need in addition to the Cash ISA and the Stocks & Shares ISA, an "Ethical, Sustainable Development Isa"...
......An ISA that is only invested in products and services that provide for the needs of the people which would of course include housing......... ..I don't think the bankers and politicians would choose this kind of ISA. But I think many of the savers would choose it if they were given the chance......... Going by recent interest rates there wouldn't be much to lose.......But there may be a whole lot more to gain than may be a possible a 4 % on their investment........An investment that may work towards an economy that the working people can provide the shortfall in the savings of the elderly................ An investment that would divert money away from the irresponsible lending of money through corporate bonds and private equity and corporate buyout bubbles!
Increasing of the minimum income tax threshold is good news for working people, but due to other factors which the government has allowed to go out of control, any tax benefits provided are likely to be wiped out immediately by other rising costs which the government constantly talks about, but repeatedly fails in actually taking any necessary action. These costs involve the rising costs of rent to private landlords, rising energy prices due to exploitation by private companies and the rising costs of credit services throughout the financial industry from the credit card companies to the pay day loan companies.What appears to have taken centre stage was the changes to ISAs. It is true that they have not been giving very good returns lately. But the fact is, the priority that these changes have been given by the Chancellor probably has as much to do with vested interests in the finance industry as it does with allowing savers to invest more money in a tax free investment......
Money invested in ISAs is invested in the stock markets to buy stocks and shares of businesses, to buy government bonds and other financial products. This is regardless of whether the money is invested in a cash ISA or a Stocks & shares ISA. The difference is that the cash ISA uses a fixed interest rate to generate the return where as a Stocks and Shares ISA is directly invested in Stocks and shares and will be directly affected by rises and falls in prices of stocks and shares. Cash ISAs pay less in general, but this also means you should never actually lose any of your investment. The term Cash or Investment ISA is slightly misleading. The money will still be invested regardless of which ISA you choose.
The problem is, what I am about to say is not going to make much sense to a lot of people who are receiving less than 1.65% return on their ISAs...........Stock market activity has now increased to pre-financial crisis levels. The buyout industry has also taken off and is also now at levels prior to the crisis. All of this involves the use of invested cash. Billlions and billions of dollars worth of it........But people providing that cash are not currently being rewarded. The new rules which allow more money to be put into ISAs is not going to make a great difference because returns till now have continued to fall. Any real benefits will only begin when the interest rates eventually rise.
The fact is that whilst some relatively wealthy savers may benefit from these changes all be it in a small way, I feel the biggest winners will be the stock markets as the press and media over the last few days has been giving free advertising for the banks in the use of ISAs. More people will no doubt be using them over the next months. Money invested will accelerate even beyond their use which has already been increasing rapidly over the last few years.
But there are a few other issues concerned with investments in ISAs.....
1......Investments in ISAs has been rapidly increasing over recent years. This may well mean that the stock markets have been benefitting from an increasing amount of cash being made available and also the government will have benefited from additional available cash to buy up their government bonds!.........Cash which would not have been available if the savers had invested their money in property for example! ISAs have probably contributed to the very slow recovery of the house buying market over the last few years. Also to the construction industry who may have been building more of those houses had there been the finance provided to pay for them. ISAs it seem have given the banks an excuse to abandon the housing market in favour of the easier returns provided by gambling on the stock markets.......
.......So are ISAs causing a bubbles in the stock markets? ...
.......Are ISAs discriminating against more ethical, job creating investments?!....
2......We know a few people have been warning about a house price bubble which is developing mostly in the South East of England which many people have blamed the 'Help to Buy Scheme' for contributing to.......
.......But what has not been mentioned by the new governor of the Bank of England, is that there is no doubt bubbles being created in the stock markets. Various assets have been sold off at what seem to be optimistic prices and there are now queues of businesses waiting for their IPOs (Initial public Offering) onto the stock markets.......... Also investments in corporate bonds makes it to easy for a business to get into vast amounts of debt which will not be an apparent problem until the bonds reach maturity. In that time the business and the market it competes in could have changed drastically and it may be that the business will not be able to pay off it's debts on bonds when they reach 'maturity'...'Maturity' being the date when the loan has to be paid back in full. This will of course affect people with ISAs invested in those companies.
3......Savers with ISAs are hoping for a rise in the interest rates being paid to them on their investments. Unfortunately businesses who start paying higher interest rates on debt which has been taken on whilst the interest rates are low will be affected when the interest rates rise....The cost of many of these businesses will rise substantially.....Much debt has been taken on by private equity companies and hedge funds and by corporations for the pure reason that the interest rates were attractive. It has generated business for the investment banks and the stock markets. Lots of money has changed hands on completion of deals. Bonuses have been paid out...............But what happens next remains to be seen......
May be we need in addition to the Cash ISA and the Stocks & Shares ISA, an "Ethical, Sustainable Development Isa"...
......An ISA that is only invested in products and services that provide for the needs of the people which would of course include housing......... ..I don't think the bankers and politicians would choose this kind of ISA. But I think many of the savers would choose it if they were given the chance......... Going by recent interest rates there wouldn't be much to lose.......But there may be a whole lot more to gain than may be a possible a 4 % on their investment........An investment that may work towards an economy that the working people can provide the shortfall in the savings of the elderly................ An investment that would divert money away from the irresponsible lending of money through corporate bonds and private equity and corporate buyout bubbles!
