abrdn Financial Fairness Trust in conjunction with the Resolution Foundation have come up with a briefing paper "ISA ISA Baby - Assessing the Government’s policies to encourage household saving"
It can be found here https://www.resolutionfoundation.org/pu ... -isa-baby/
One of its recommendations is to encourage saving by lower-income families "by reducing the significant support currently going to the already-wealthy".
They propose a £100,000 cap on ISAs (both cash and stocks and shares) and use the increased tax take from that to fund an increase in generosity of the existing Help to Save scheme:
Therefore, the sensible approach would be to cap ISA amounts, which could be done in a variety of ways. It is already the case that there is an annual cap on the amount that can be added to an ISA in any given tax year (currently £20,000). But there is no cap on the total value allowed to be held in ISA accounts, nor is there a cap on the income from the value within ISA accounts. It would be administratively difficult to cap returns or income because returns from stocks and shares ISAs can vary widely and over time. A simpler approach would be to cap the total value an individual is allowed to hold across any ISAs – and when this cap is hit, either as a result of active saving into an ISA or as a result of savings income or capital gains, then an individual would no longer be able to add money to any ISA account. Setting this cap at a relatively high level, say £100,000 (£200,000 for couples), would ensure that incentives to save for those with lower savings levels were not reduced at the same time as generating additional revenue which could be used to fund an increase in generosity of the Help to Save scheme. Figure 20 provides estimates of the revenue raised by capping existing individuals’ ISA holdings at £100,000, based on taxing returns on cash ISAs as income and taxing the returns on stocks and shares ISAs as capital gains. This shows that there would be significant revenue captured even with a cap set at a very high level, and that this would exceed any plausible estimate of the cost of expanding the generosity of Help to Save. But what is also evident from Figure 20 is that taxing returns on ISAs above £100,000 would largely impact those aged 60 and above: 1.5 million people had ISA holdings above £100,000 in 2018-20, of which 1.1 million (72 per cent) were aged 60 and above.
Applying this retroactively creates a challenge for those with more than one ISA account. One approach, and the one we assume for the following policy costing, is that individuals would need to choose what accounts to withdraw in order to meet the overall £100,000 limit. It would be needed to phase this requirement in over time given some ISA products have contractual restrictions on withdrawing finances immediately. There could also be legal challenges with a retroactive approach but that is beyond the scope of this paper and there are many examples of previous retrospective changes (e.g. cutting the lifetime pensions cap).
I don't know how likely this would be to ever get put into practice, but it shows it's being talked about.
Scott.
