After so many years of waiting for good news on pensions and savings, suddenly so much comes at once. Like the proverbial Number 13 buses, a whole raft of policies has all come at once – and they are good news. It’s also a brilliant Budget for Tory election prospects of course. The devil of some of this will be in the detail but overall this is just good news all round. And will even bring in more tax for the Chancellor short-term as pension lump sums will deliver higher tax revenue than taking small amounts of income or delaying annuity purchase. Here’s my take.
1. ISAs now more flexible with £15k limit
The Chancellor has delivered a Budget for savers, albeit against the backdrop of pitiful interest rates, but allowing a £15,000 ISA limit and all of it in cash, will suddenly increase the interest income that people can earn, since they will no longer be taxed on it. The Chancellor will finally allow people to choose whether they put all their ISA allowance into cash, or stocks and shares, rather than only being allowed to have half in cash. You can switch, as you wish, between different investments and will be able to do what’s best for you. If you are saving for a house deposit, you can put your money into cash and not worry about investment risk. If you’re retired and trying to live on your savings, again you can shelter more money from tax without being forced to take more investment risk.
2. First £5,000 of your savings interest to be tax-free
Currently, there is a 10% starting rate of tax for very low earners, up to £2880 of income, but that starting rate is now rising to £5,000 and the 10% rate is being cut to zero. This will help poorer savers and will also be simpler.