Asked by: Tom Blenkinsop (Labour - Middlesbrough South and East Cleveland)
Question to the HM Treasury:
To ask Mr Chancellor of the Exchequer, what impact assessment he has made of the effect of pensioners savings bonds on the private sector investment market.
Answered by Baroness Morgan of Cotes
The Budget set an upper limit of £10 billion for the level of inflows that National Savings and Investments (NS&I) should attract into the fixed-rate savings bonds for people aged 65 or over. This is less than 1% of the total UK retail savings market.
The NS&I savings bonds announced at Budget should therefore not stop other institutions from attracting deposits or increasing lending. Furthermore, the introduction of New ISAs with an annual subscription limit of £15,000 will provide additional opportunities for banks and building societies to attract retail deposits.
Asked by: Tom Blenkinsop (Labour - Middlesbrough South and East Cleveland)
Question to the HM Treasury:
To ask Mr Chancellor of the Exchequer, what assessment he has made of the compatibility of the proposed role for National Savings and Investment (NS&I) offering pensioner savings bonds with NS&I's objective of reducing the cost to the taxpayer of Government borrowing.
Answered by Baroness Morgan of Cotes
NS&I's purpose is to provide cost effective financing for the Government that balances the interest of savers, taxpayers and the wider markets.
Given that the NS&I fixed-rate savings bond for people aged 65 or over are a Budget measure designed to offer targeted support to a particular group of savers, the costs of raising funding through these bonds, rather than gilts, was represented in Table 2.1 of the Budget 2014 document.
Asked by: Tom Blenkinsop (Labour - Middlesbrough South and East Cleveland)
Question to the HM Treasury:
To ask Mr Chancellor of the Exchequer, pursuant to the Answer of 24 March 2014, Official Report, column 12W, on individual savings accounts and with reference to HM Revenue and Custom's policy paper published on the new ISA and changes to Junior ISA and the Child Trust Fund, what assessment he has made of the consequences for (a) the economy, (b) capital markets and (c) business of a shift in savings portfolio composition away from securities towards cash.
Answered by David Gauke
HM TREASURY
Tom Blenkinsop MP
MIDDLESBOROUGH SOUTH & CLEVELAND EAST
To ask Mr Chancellor of the Exchequer, pursuant to the Answer of 24 March 2014, Official Report, column 12W, on individual savings accounts and with reference to HM Revenue and Custom's policy paper published on the new ISA and changes to Junior ISA and the Child Trust Fund, what assessment he has made of the consequences for (a) the economy, (b) capital markets and (c) business of a shift in savings portfolio composition away from securities towards cash. 193987
DAVID GAUKE
From 1 July 2014 the overall annual New ISA subscription limit will be increased to £15,000 and can be used for either cash or stocks and shares investments, or any combination of the two, up to this limit. At the same time the annual Junior ISA and Child Trust Fund subscription limits will be increased to £4,000.
These measures were part of a wider Budget packaged aimed at supporting savers. These ISA measures will reduce income tax on savings for people constrained by the current limits, improving incentives to save and increasing real household disposable incomes. Over 6 million people each year are expected to benefit from these increases, including over 5 million adults currently constrained by the cash ISA limit, three quarters of whom are basic rate taxpayers and a third are pensioners.
As HMRC's published Tax Information and Impact Note explains, the increase to real household disposable incomes resulting from the New ISA changes might feed through to higher consumption or savings in the household sector. There may also be a shift in the savings portfolio composition towards cash deposits. At the same time there may be an overall increase in savings invested in securities.
Stocks and shares, and cash offer very different risk and expected return profiles, and the tax treatment will be just one factor affecting investors' choice between them. In 2012-13, the FTSE All-Share Index grew by 5.6 per cent (excluding dividend yield). In contrast bank and building society deposit returns averaged 1.95 per cent.
For individuals who prefer to hold their savings portfolio in stocks and shares rather than cash, the New ISA will provide a significant increase to the amount that can be invested and held within the tax-advantaged ISA wrapper for 2014-15, from £11,880 to £15,000.