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Wednesday, 19 March 2014 11:19

Budget 2014: Sweeping Isa and pension changes

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Chancellor George Osborne Chancellor George Osborne
The Chancellor announced a wave of tax changes to Isas, pensions and higher rate thresholds in his Budget speech this afternoon including raising the annual Isa limit to £15,000.

Many of the most significant changes were in Isas and pensions including the proposed merger of cash and stocks and shares Isas and a new higher Isa limit of £15,000. Mr Osbone said: "I want to help savers by dramatically increasing the generosity and flexibility of Isas."
Among the headline announcements was a further rise in the personal tax allowance - the level at which working-age people start paying income tax to £10,500. It is already due to rise to £10,000 in April. The higher rate threshold will also rise for the first time this Parliament, from £41,450 to £41,865 next month, and then by a further 1% to £42,285 next year
People earning £42,000 up to £100,000 will be paying less income tax because of this Budget, he said.
Of this change George Osborne said: "Over 3m of the lowest paid will be lifted out of the income tax all together and I'm incredibly proud of what we've achieved."
Major changes are on the way for savings and pensions.
Mr Osborne said: "We want to help hard working people keep more. Our tax changes will help people in work but there's a group who've had particularly difficult time in recent years – savers.
Mr Osborne said that stocks and shares Isas will be able to be merged with cash Isas. He said this would make them more flexible – added to the fact that the annual limit is going up to £15,000. It will now be possible to switch funds from one form of Isa to the other, a move called for by several building societies and banks who say it will help older savers reduce risk by moving into cash near retirement. 
He said: "Up to £10bn of these bonds will be issued. A maximum of £10,000 can be saved in each bond."
The exact rates will be set in the autumn - the assumption is 2.8% for a one-year bond and 4% on a three-year bond.
The junior Isa limit will also go up to £4,000.
Turning to pensions he said: "Many pensioners have seen incomes fall because of interest rates. Time they were helped."
He said: "Pensioners will have complete freedom to draw down as much as they want, when they want. No one will have to buy an annuity."
The income requirement for flexible drawdown will fall from £20,000 to £12,000; the capped drawdown limit will fall from 120% to 150%; the size of the lump sum small pot definition will rise five-fold to £10,000 and there will be a new 'pensioner bond' from NS&I.
He pledged reform of DC pension schemes, saying: "We will completely change the tax treatment of DC pensions to bring them into line with the modern world.
There will be a new guarantee that anyone retired will get free impartial advice on their retirement incomes and annuities. He will provide £20m to work with consumer groups to develop a new 'right to advice' scheme.

Last modified on Monday, 24 March 2014 14:55

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