So, we have an election looming – a snap one at that, which took everyone by surprise because Theresa May had repeatedly said she did not intend to call an election until 2020.
That said, the Brexit negotiations she is about to enter into mean that she wants to have the strongest possible political platform. Whether her election strategy will provide that remains to be seen. After all, recent results including the referendum itself, the previous general election and Donald Trump becoming President of America all show that we may need to prepare for the unexpected.
When it comes to savings, there has been some considerable progress made under the Tories, but they do not have the market for savers cornered by any means. It was Nigel Lawson who originally brought in Personal Equity Plans (PEPs) in 1986, which only allowed investment in stocks and shares, with John Major adding the cash Tax Exempt Special Savings Account (TESSA) in 1990 in his only Budget as Chancellor.
TESSAs had a five-year life span and it was possible to put up to £9,000 in total into this plan during this time, after which the Follow-on TESSA was launched…in 1995.
Labour introduced Individual Savings Accounts (ISAs) in 1999, meaning the last TESSAs matured in 2004 and following on from this, the cash ISA became the tax-free savings vehicle of choice for successive Governments since. They were not altogether simple in their early years, with mini and maxi ISAs, then cash and stocks and shares and even life insurance ISAs for a short amount of time. And time has not changed this. If possible ISAs are even more complicated today! See our latest guide to navigate the ISA maze.
For the first 10 years of their existence, under the Labour Government, ISA limits did not shift. For cash ISAs, you could put in a maximum of £3,000 and no more. Limits started to shift in 2008/9 when the cash ISA allowance rose to £3,600, but 2010/11 saw a big jump to £5,100 under Labour shortly before the election – a move to curry favour with the electorate? If so, it did not work out the way they had hoped.
The next UK Government, the coalition Government between the Conservatives and the Liberal Democrats, is where we started to see some more moves in savers’ favour, but they were not initially significant. By 2013/14 the cash ISA limits had only risen to £5,760.
However, it was at the 2014 Budget under the coalition Government that George Osborne finally removed the difference in the limits between a cash and stocks and shares ISA – from the 2014/15 tax year, you were entitled to put £15,000 in either a cash or stocks and shares ISA in any proportion. A big change that enabled cash savers to make much more of their money.
It was also under the coalition, but in George Osborne’s Budget of 2015, that the Personal Savings Allowance was announced that it would be introduced in April 2016, which gave £1,000 of tax-free savings income each year to the majority, with £500 to higher rate taxpayers (nothing for additional rate taxpayers). The move, the Chancellor said, would take “95% of people out of savings tax altogether”.
Of course, in 2015 the Conservatives won a majority again and took control of the country and from that point to this we have seen the somewhat muted introduction of the Help to Buy ISA, the ISA allowances rise to £20,000 this tax-year as well as the damp squib that was the launch of the Lifetime ISA given that no providers have launched a cash version, yet.
Unfortunately, many of the recent government initiatives have been clouded by the fact that interest rates have been at an historic low for some time now, which has somewhat outweighed many of the benefits.
What will happen in the election remains to be seen, but the polls suggest a majority for the Conservatives, which is what the Prime Minister is hoping for. But shocks happen, especially in recent times, so it is important not to rule anything out.
The best thing you can do as a saver, is make the most of the benefits while they are on offer, because you never know what the new Government – no matter what political colour it is – will change when it takes power.
Anna Bowes, Co-Founder and Director of Savings Champion