Lootman wrote:hiriskpaul wrote:We might see some tinkering of the tax system and various reliefs to increase the burden of tax on those pensioners with larger incomes. One possibility I can see on the horizon is to limit in some way the the tax relief being handed to people who have accumulated significant investment portfolios in ISAs. Perhaps even going so far as to abolish ISAs for those over state pension age and tax income/capital gains from that point as unsheltered investments are. A change like that would be an easy sell to many voters.
It's possible but, as with pensions, it would be undermining decisions made by thousands of people over several decades. For instance I made a conscious decision years ago to favour contributing to ISAs (and PEPS before them) rather than contribute to a SIPP. In fact I don't have a SIPP at all. I reckoned that in the long term the tax benefits of tax-free income and gains would outweigh the upfront tax benefit of a SIPP. And so far that has been proven the correct choice. But if my existing ISA investments were not grandfathered into the existing tax treatment, that would all fall apart and I would have the worst of both worlds - no tax breaks at either end.
I'm not saying the voters would care if a few fairly well off old codgers like me got fleeced like that, but it would be very unjust on that minority. Instead I'd argue for a "new ISA" going forward where the new tax rules would apply. Or no new ISA at all but existing accounts retained on current terms.
I take your point. This could be unfair on those who took a conscious decision to invest in an ISA rather than a SIPP. However, that decision was likely to have been made when SIPPs were far more restrictive than they are now, e.g. with compulsory annuitisation, so it could be argued that decision might still have been made at the time even if it was known that ISAs would become taxable in retirement.
There would undoubtedly be a lot of losers should ISAs lose their tax status, or have some other kind of cap on tax relief and I would be one of them. But the current system of totally unlimited tax relief strikes me as a very convenient target for a chancellor. It is very easy to spin an argument against unlimited tax relief along the lines of "The richer you are, the more tax relief you get. How can that be fair?". I agree a phased arrangement would be fairer and typically has been done with the various pension changes, so might happen with ISA rule changes. Personally I would hope it did!