With many British expats relying on their savings and pensions for income, today’s budget gave a welcome boost to savers and to current and future pensioners.
Measures announced by the Chancellor today include –
HELP FOR SAVERS – support for savers is at the centre of this Budget.
- Make ISAs simpler by merging the cash and stocks ISAs into a single New ISA. The annual limit will increase to £15,000 a year – for either shares, or cash, or a combination of both.
- Abolish the 10p rate on savings income. The 10p starting rate on savings income will become a zero-pence rate. The zero-pence band will expand up to £5,000 of savings income. 1.5 million low income savers will benefit.
- A new pensioner bond in January 2015. It will offer a better return than any equivalent in the market today. The rate will be set in the Autumn for the best possible offer – but the central assumption now is 2.8% on a one year bond and 4% on a three year bond. The amount people can invest in Premium Bonds will also rise, first to £40,000 on 1 June this year then to £50,000 in 2015/16. And there will now be 2 £1 million prizes every month.
PENSION FLEXIBILITY – fundamental reform of the taxation of defined contribution (DC) pensions
From April 2015 the government will legislate to remove all remaining tax restrictions on how to access defined contribution pension pots:
- No one will have to buy an annuity if they don’t want to. Those who still want the certainty of an annuity, as many will, will be able to shop around for the best deal.
- There will be no punitive 55% tax rate if you try and take more than your tax-free lump sum. It will still be possible to take 25% of a pension pot tax-free on retirement. But what you take above the tax-free lump sum will be taxed at normal marginal tax rates – not 55% as at the moment.
- A new guarantee, enforced in law, that everyone who retires on defined contribution schemes will be offered free, impartial, face-to-face advice on how to get the most from the choices they will now have. We will spend £20 million over the next two years to work with consumer groups and industry to develop this new right to advice.
In the meantime, from 27 March, the government will:
- cut the minimum income requirement for flexible drawdown from £20,000 to £12,000;
- raise the capped drawdown limit from 120% to 150%;
- increase the size of a single pension pot that can be taken as a lump sum five-fold to £10,000, and increase the number of pots under £10,000 that can be taken as a lump sum from two to three; and
- almost double the size of total pension savings that can be taken as a lump sum to £30,000.
Heather Harper, Chairman of Conservatives Abroad said “‘Savers have had a hard time in recent years and it’s time Britain helped them out. That’s why whether you want to save for a home, save for your family or save for your retirement this is a Budget for you.
“These radical changes will help boost economic security for people who work hard and save hard – and show that the Conservative Party is on your side.”