“This felt a little like a schizophrenic Budget. On the one hand the Government has announced a number of initiatives to encourage saving, but the reduction in the lifetime allowance tells pension savers that if their investments perform too well they will face punitive tax charges. I have long been of the view that applying a control at the point of contribution and benefit payment is excessive and at odds with the spirit of greater freedom,” says Andy Bell, chief executive, AJ Bell.
“For a Budget that was trailed as being free of gimmicks and giveaways, the drop in the Lifetime Allowance will strike some as being a nasty trick and a takeaway. The introduction of new ISA freedoms will be well received but it seems unnecessarily restrictive to require that the money is replenished in the same tax year.”
Notes for Editors
- The key items relating to pensions and savings from today's Budget were as follows:
1. A reduction in the Lifetime Allowance (LTA) for pension pots from £1.25 million to £1 million from April 2016
2. The Lifetime Allowance will then be index-linked to inflation from April 2018
3. The annual allowance for contributions to Self-Invested Personal Pensions (SIPPs) was left unchanged at £40,000
4. The annual Individual Savings Account (ISA) subscription limit was increased from £15,000 to £15,240.
5. The personal tax allowance will increase to £10,800 for 2015-16 and £11,000 for 2016-17.
6. The higher rate tax threshold will rise by more than inflation from £41,865 to £43,300 by 2017-18
7. Savers will be able to sell their annuities for cash
8. ISA flexibility will be further increased as savers will be able to take money out and then put it back without affecting their annual subscription limit.
9. A new 'Help-to-Buy' ISA will assist first-time buyers. For every £200 contributed the Government will add an extra £50.
10. A new personal savings allowance means the first £1,000 on interest earned will be tax-free for standard rate taxpayers from April 2016. This figure will be £500 for higher-rate payers.