George Osborne certainly pulled some rabbits from the hat in his latest Budget. In fact, if you are a saver or have a pension, then today’s Budget will go down as the most significant in a generation.
So, who are the winners and who lost out?
We reveal all.
Winners
Prospective pensioners
When you get to retirement and need to convert your pension pot into an income, you will have more options than before.
From April 2015 the Chancellor has opened up Flexible Drawdown to all. Previously, this option, which allowed you to take as much or as little as you liked from your pension pot, was only available if you had a minimum guaranteed income of at least £20,000 per year, from April 2015 it will be available to all.
It doesn’t of course mean a free for all, with people raiding the last penny from their pension pot. After all, you will still need an income in retirement, but it will offer a useful alternative option to those people who don’t want to use an Annuity.
People with small pension pots will also benefit from the changes to today’s Budget, which will allow greater access until April 2015 when the new rules come fully into force.
ISA investors and savers
It’s been a momentous day for savers, look at what’s changed:
- The maximum contribution into an ISA has been increased to £15,000
- Savers will now be able to put the full amount into a Cash ISA, allowing them to shelter nearly £10,000 more each year from tax
- Stocks & Share ISA holders will now be able to transfer into a Cash ISA, previously this was not possible
- The Junior ISA limit has increased
- Peer to peer lending will now be eligible to be held in an ISA
- The 10% tax rate on savings interest has been abolished
Overall a package of measures which most savers can hardly have dared to believe they would get, from a Chancellor who has regularly ignored their plight.
Older savers
George Osborne announced that a new Pensioner Bond will be launched by National Savings & Investments (NS&I) in January 2015.
The bond will offer a fixed rate for one or three years and will be available to anyone over the age of 65.
The maximum contribution will be relatively low at £10,000, although the suggested interest rates of 2.8% for the one year bond and 4% for three years look very attractive.
Premium Bond savers
If you’re a fan of NS&I’s Premium Bonds, you will be pleased to hear that the Chancellor has announced an increase in the number you can hold.
From August 2014 you will be able to hold up to £40,000 in Premium Bonds, up by £10,000 on the current limit. From 2015/15 this will rise again to £50,000.
However, Premium Bond savers should note the prize fund has not increased.
Low and middle earners
The Personal Allowance, the amount you can earn before you start to pay tax, will rise by £500 to £10,500 from April 2015.
In 2010, when the coalition started, the Personal Allowance stood at £6,475, since then it has risen steadily, taking millions of people out of the Income Tax system altogether.
Working parents with children
Announced before the Budget the headlines were grabbed by the help being given to working parents to help meet the cost of childcare.
The first £10,000 working parents spend on care for children under 12, will be effectively tax-free, reducing the net cost to £8,000.
Around two million families will benefit from the scheme.
Drinkers
Beer duty will drop by a penny, whilst the duty on ‘traditional’ cider, whiskey and spirits will remain unchanged.
Drivers
The increase in fuel duty planned for 2014 has been cancelled.
The Chancellor has also earmarked £200 million to repair potholes in the country’s roads.
Bingo players
In a rather amusing section of the Budget, the Chancellor announced that duty on games of bingo would be halved, from 20 pence to 10 pence.
Losers
People retiring after 2028
If you are retiring after 2028 today wasn’t such a good day for you; anyone retiring after this date will have to wait until they are 57 to be able to take their pension. After 2028 the minimum age at which you can take your private or workplace pension will be 10 years below your State Pension Age.
For many younger people, this means that the earliest they will be able to take their private pension, including any money built up as a result of Automatic Enrolment, will be 60.
40% taxpayers
The income at which you will start to pay 40% tax will continue to rise by just 1%, bringing more and more people into the higher rate tax bracket.
Smokers and gamblers
The duty on tobacco will continue to rise at 2% above inflation for the rest of this parliament.
The gambling industry was also hit hard with duty on fixed on betting machines increased to 25% and a crackdown on offshore bookmakers announced.
Insurers
Over £3 billion was wiped off the value of Annuity providers and insurers today as the contents of the Budget were digested by investors.
Those people suggesting that Annuities might be dead are premature, but George Osborne’s comments were certainly unhelpful to the likes of Just Retirement, Partnership and Legal & General, to name just three.
Were you a winner or a loser?
We’d love to hear what you think about the Budget, were you a winner or a loser? Are the breaks given to savers long overdue? Can people be trusted with their pension pot?
Why not leave us a comment below?
If you want to discuss how you are affected by the Budget our team of Independent Financial Advisers in Nottingham are here to help.
Feel free to call one of our IFAs today on 0115 933 8433
0115 933 8433, alternatively enquire online or email info@investmentsense.co.uk
