I've sat through a dozen or more budgets. Most even during the financial crisis have been exceptional only for their sheer tedium. I didn't expect anything more exciting from George Osborne this week. I was wrong.
Regardless of how cynical you are, this was a good budget for investors. Regular readers will know that we like individual savings accounts (Isas). They're more flexible than pensions and less of a tempting target for money-hungry governments. The main benefit pensions have had over them is the relatively low Isa allowance. That's all changed now.
From July, you'll be able to put £15,000 a year into an Isa, and you'll be able to split it between cash and investments as you wish. That's £30,000 a year between a couple plenty for most people's needs.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
All good news for savers. But the changes on pensions are even more radical. From April 2015, the government has "removed the effective requirement" to buy an annuity.
Annuities haven't been compulsory since 2011, but the rules on income drawdown for people with relatively small pots have made it unappealing.Now, not only will drawdown rules be less stringent, you'll also be able to take out your entire pot at once if you wish.
It's a smart way to deal with the annuity problem. Everyone has known for years (we've banged on about it for long enough) that annuity providers as a whole have been ripping off a near-captive audience. This puts pressure on providers to create and sell long-term savings and income products that are genuinely competitive and attractively priced, rather than mouthing empty platitudes about shopping around'.
Of course, it's also a crafty way for the government to access people's pensions. If you do take out your whole pot, you'll pay tax at your marginal rate (rather than 55%) on the amount over the 25% tax-free lump sum. As Robert Peston noted on the BBC, this is expected to raise "more than £1bn a year by 2018-2019" as people can't resist taking advantage.
It's another reason to stick with Isas governments love to fiddle with pensions and there's always an ulterior motive. That said, this is a major simplification, which is to be welcomed.
There is just one concern at the back of my mind. No one rings a bell at the top of the market. But I do wonder if this new attack on annuities, just as they are at their least attractive, is another sign that we've seen the bottom of the interest-rate cycle.
If that's the case, the chancellor may have far more to worry about, given the still dire state of Britain's finances, come the next few budgets.
-
Why CEOs deserve a pay riseOpinion The CEOs of big companies often come under fire for being grossly overpaid. But the truth, as per some economists, is the opposite. Do they merit a pay rise?
-
Europe prepares to stand alone as Trump turns on UkraineSupport for old military alliances is wavering in the US under Donald Trump. Europe’s leaders are rushing to fill the void. Simon Wilson reports
-
Inflation may be slipping but there is still plenty of misery aheadEditor's letter Inflation may be a little lower than last month as the prices of petrol and diesel fall back, but it remains structural and long-term, says Merryn Somerset Webb. And there are no painless solutions.
-
Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
-
How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
-
The public may have reached its limit for tax risesEditor's letter The UK tax burden is now at a 70-year high. And, while there may be some reason to hold off on cuts right now, taxes are too high because the state tries to do too much. Perhaps it should do less, says Merryn Somerset Webb.
-
Things may look bad – but they’re not that badEditor's letter The UK faces plenty of problems, says John Stepek. But things may not be as bad as they look. Our debt to GDP ratio is lower than many other major economies, and high employment means a healthy tax take. That gives the new chancellor room to cut taxes so people can keep more of their own money.
-
Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
