Osborne gives savers a boost

Changes to tax-free savings accounts announced in the Budget are good news for savers.

Chancellor George Osborne's fifth budget speech this week, despite being widely leaked, still contained a few pleasant surprises.

The most eye-catching measures were for savers, with a revamp of pension arrangements at the centre. Restrictions on pensioners' access to their pension pots were removed, making it more attractive for retirees to opt for alternatives to an annuity.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

The total amount of pension savings that can be taken as a lump sum was raised from £18,000 to £30,000. New pensioner bonds will be introduced. The 10p tax rate for savers has gone. Cash and equities individual savings accounts (Isas) will be merged and the annual allowance hiked to £15,000.

Otherwise, the basic-rate tax allowance rose marginally, as did the higher-rate threshold. Investment allowances for businesses have doubled to £500,000 and been extended to the end of 2015 at a cost of £2bn. The Office for Budget Responsibility hiked its GDP growth estimates for this year and next to 2.7% (from 2.4%) and 2.3% (2.2%).

Advertisement
Advertisement - Article continues below

What the commentators said

With restrictions eased on pension pots, we should now see insurance and investment companies come up with new products "to court these liberated funds". Annuity providers will have to "up their game" if they want to keep their customers.

This is a "free-market solution to the problem of annuity rip-offs". It's also a belated recognition that savers have been "a long-forgotten species amid years of record low interest rates", as the FT's Lionel Barber pointed out.

But while the savings changes and doubled corporate investment allowance bode well longer term, the macroeconomic backdrop for the next few years remains difficult. The GDP growth upgrades and consequent fall in predicted borrowing doesn't change the fact that "the fiscal consolidation embarked upon back in 2010 is still less than halfway through", said Capital Economics.

So slow has the recovery been in recent years that we will still borrow £108bn this year. The estimate for this year was once £60bn. Next year the annual overspend will still be over 5% of GDP.

Osborne is also hoping no shocks, such as Scottish independence or a meltdown in China, will blow our new-found growth off course, said Iain Martin on Telegraph.co.uk. If growth falters, the hole we are in will only grow deeper.And the obvious cuts and tax rises have been made, said Janan Ganesh on Twitter.com. "The coming years will be hideous for whoever governs."

Advertisement

Recommended

Visit/516758/beyond-the-brexit-talk-the-british-economy-isnt-doing-too-badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
Visit/513684/companies-cut-back-on-their-pensions-bills
Personal finance

Companies cut back on their pensions bills

Britvic is the latest firm hoping a cheaper inflation index will cut pension costs. David Prosser reports.
28 Aug 2019
Visit/509683/good-news-for-savers
Pensions

Good news for pensions savers from HMRC

HMRC has withdrawn its appeal over breaches of the pensions lifetime allowance.
28 Jun 2019
Visit/502738/dont-miss-the-pensions-deadline
Personal finance

Don’t miss the pensions deadline

There are just five weeks left in the 2018-2019 tax year, so make sure you’ve made full use of your allowances.
6 Mar 2019

Most Popular

Visit/investments/commodities/silver-other-precious-metals/600812/buy-silver
Silver and other precious metals

You should all own some silver. Just don’t expect it to make you rich

Silver is cool, beautiful and immensely useful. But for investors it's the most frustrating of metals. Dominic Frisby explains why you should own some…
12 Feb 2020
Visit/economy/uk-economy/600837/rishi-sunak-new-chancellor-spending-splurge
UK Economy

Britain has a new chancellor – get ready for a major spending splurge

The departure of Sajid Javid as chancellor and the appointment of Rishi Sunak marks a change in the style of our politics. John Stepek explains what's…
14 Feb 2020
Visit/economy/600814/money-minute-friday-14-february-the-latest-from-rbs-britains-state-owned-bank
Economy

Money Minute Friday 14 February: The latest from RBS, Britain's state-owned bank

Today's Money Minute previews results from RBS – Britain’s state-owned bank – and from pharma giant AstraZeneca.
14 Feb 2020
Visit/investments/stockmarkets/european-stockmarkets/600725/is-2020-the-year-for-european-small-cap
Sponsored

Is 2020 the year for European small-cap stocks?

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, on why he believes European small-cap stocks are performing well.
12 Feb 2019