George Osborne announced a big surprise at the end of his budget – major changes to the Isa and pension regime. Here are all the main changes announced in the budget:
• From 1 July, the Isa limit will rise to £15,000. Savers will be able to save the whole amount in cash, stocks and shares, or any combination.
• Existing Isas can be transferred between shares and cash – or vice versa – without any restriction. These restrictions will be lifted in July as well.
• Under current rules, anyone with a defined contribution pension can withdraw a 25% tax-free lump sum from their pot when they retire. If you take a larger lump sum, you have to pay 55% tax on the excess. Under new rules, you’ll only have to pay your marginal tax rate on the excess – 20% for most pensioners.
• More retirees will be able to go into ‘flexible drawdown’ with their pension pots. In other words, they’ll have complete flexibility on how much money they can withdraw. They’ll only need to demonstrate they have £12,000 in other pension income as opposed to £20,000 now.
• Anyone with a pension pot who is about to retire can receive free financial advice on what to do – a new ‘right to advice’.
New pensioner bond
A new savings bond for the over-65s will be launched. The interest rate on the one-yer bond will probably be 2.8%, with a 4% rate on the three-year bond.
• The basic rate income tax personal allowance will rise to £10,500.
• The higher rate (40%) threshold will rise to £41,865, and then by 1% each year.
Growth and debt
The economy is expected to grow by 2.7% this year and 2.3% next year. The deficit will be £95bn this year, falling to £75bn next year, and then moving into a £5bn surplus in 2018/19.
The new build element of Help-to-Buy will be extended to 2020. The mortgage guarantee element of the scheme, which isn’t just restricted to new build homes will run to 2016.