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How does the Chancellor’s 2014 Budget affect you?

Budget bag

Did you tune in to the Chancellor’s Budget announcements? How was it for you – do any of the proposed changes have an impact on you and your finances? Here’s our digest…

There was some good news for savers as the Chancellor announced that the Isa allowance is being changed to one single and simple £15,000 allowance. So instead of keeping £5,760 away for a rainy day, from 1 July you can bump that up to £15,000 (if you’ve got the money that is) and flit between cash and the stock market with your entire balance. And the 10p tax rate for savers is also to be abolished.

A new Pensioner Bond from National Savings & Investments will also be launched in 2015, with up to £10bn of these bonds issued and a maximum of £10,000 can be saved in each bond. These will pay 2.8% for a one-year bond and 4% in a three-year bond tax-free – well above current market rates.

And the Junior Isa allowance is increasing to £4,000 with transfers from CTFs to Junior Isa set to be allowed from 6 April 2015. Good news for all those who shared their concerns over not being able to turn their child’s trust fund into a Junior Isa over the last few years.

Major changes in pensions

George Osborne also announced a radical overhaul of pension savings and the ways that you can access them. The big announcement is that, from next year, you’ll be able to withdraw your entire pension savings in one go if you wish – no longer will you need to buy an annuity to convert your savings into an income. And you won’t face a 55% tax for doing so, just paying tax at your marginal rate.

But Mr Osborne also introduced some short-term changes. From the end of March, the income requirement for flexible drawdown will fall from £20,000 to £12,000 and the capped drawdown limit will rise from 120% to 150%.

The size of the lump sum small pot will rise five-fold to £10,000 and the total pension savings you can take as a lump sum will almost double to £30,000.

On the housing front, the first part of the Government’s Help to Buy scheme, Help to Buy equity loans, will now run until the end of the decade. Government-backed Help to Buy equity loans are available to help people with a 5% deposit to buy a new-build property. And Mr Osborne also announced that 15,000 new homes will be built in Ebbsfleet, Kent, as part of a new garden city development.

So what were your budget highlights – the new 12-sided £1 coin, the potential to boost your Isa allowance of the hope of changes to your potential retirement fund?

Comments
Member

This is the first Budget I can remember, I’m almost 76, which there is not 1p advantage for Pensioners in particular single ones.
Those who have called for Pensioners to bare more of the cost of the incredible mess made by the B’s, not only banks but politicians, in both this country and the USA have completely won the battle.
Any spare cash they had has been wiped out during the past 8 years so what advantage can they get from the new ISA limits. Annuities have been taken long ago. When I took mine I would have to live to 104 to get my initial pot back. Thankfully I did it 12 years ago and not now. I’m sick of hearing politicians saying it is their duty to look after their aged populations. This Budget demonstrates they do not care at all but we are a drain on their resources.
An economy based on house ownership will alawys be at the mercy of the money markets.

Member

I am confused – but I assume I am expected to be. As I understand it, as a teacher in a teachers pension scheme, I will not be able to get the whole lump sum paid and will still have to buy an annuity. Or am I wrong?

Member

Mic, my understanding is if your scheme provides an income plus a lump sum then you can presumably take all the lump sum, but not the money on which the income is based. If your scheme only provides a lump sum, then you will be able to do with it what you choose after next year – bearing in mind what you withdraw is taxable. Anyone know differently?

Member

As a teacher in the TPS you are eligible for a lump sum payment plus your monthly pension. The lump sum and pension are based on your earnings x number of years of service. At the time of your retirement, the TPS will send you the option to take the minimum lump sum and full monthly pension, or a larger lump sum and a smaller monthly pension. Fortunately I have a son in finance and he advised me “If you were a saver, you should take the larger lump sum, however, you are a spender so you should take the basic lump sum and the full monthly pension!” It was good advice. The TPS should let you know what your anticipated pension will be, try looking on-line or write to them for information.

Member
Keith Paterson says:
22 March 2014

Pensioner’s budget. Makes me laugh. A good one for the wealthy who can shelter their investments from 40% tax in ISAs and stuff a million in a 4% bond. And to flatter people that they are wise enough not to splurge their pension pot when they get their hands on it. When it’s gone the taxpayer will have to pick up the tab when they then plead poverty at 90.
He must have upset some of his financial mates, having ruined their rip off game of providing poor annuities for doing very little. Sorry to say, the average Joe in the uk doesn’t have the first clue about how to invest and many will be delighted to grab the cash and run.

Member

There seems a good deal of inequity in life – when an OAP is supposed to exist on £140 a week (£7280 a year) and others get benefits Capped (!) at £25000; when many public servants get gold plated pensions rising with inflation, subsidised by the other taxpayers and pensioners on poor annuities. But that’s life. Many will benefit from the budget – not all of whom pay 40% tax or have millions to invest. Some sensible steps in the right direction. Particularly when thrift is rewarded.

Member
Reg corns says:
24 March 2014

An independant Scotland could lead to the end of the union flag . This would have a knock on effect in parts of the commonwealth.
Many Scotsn live off the work and sacrifices of their own countrymen and women who move around the kingdom and the world to support family back home . Many of those would like to stay in the Union.
Now I go to Canada, the Quebecians campaigned to go French and leave the principle of a united Canada, they saw their future lay in a Canada for all. I suggest the Scots think likewise. A drop of oil inthe north sea is no guarantee for the future.
sometimes I really think think Scots are their own worst enemy.

Member

I took out an annuity, but it is only £950 per year, with these new changes in the budget can I now take the full cash value or am I stuck with the annuity??

Member

rogermac, an annuity is effectively an insurance that you have purchased and it is not possible to reverse the transaction – stuck with it for life. That is my understanding.