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What does the Budget mean for savers?

POSTED: 20th March 2014
IN: Personal Guides
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George Osborne's Budget was welcomed by savers and pensioners alike, who will be rewarded for years of frugality.

George Osborne's Budget was welcomed by savers and pensioners alike, who will be rewarded for years of frugality.

Savers were placed at the heart of the chancellor's Budget package, with George Osborne praising people who have worked and saved hard for their whole lives.

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Mr Osborne has unveiled an overhaul of tax rules, which will allow people to keep much more of their own money, as a reward for "doing the right thing" and putting money aside.

After years of record low interest rates and other emergency measures put in place to boost the struggling economy impacted savers significantly, the chancellor says the government is now taking steps to help those who deserve it.

As well as savers, pensioners are set to be the key beneficiaries of the Budget - the people that Mr Osborne says have "made sacrifices to provide for their own economic security in retirement".

From July, a new £15,000 ISA limit will be implemented, which can be used to deliver tax-free returns on either cash or shares, while the 10p starting rate of tax on savings income will also be abolished.

New rules have also been unveiled to make it both easier and cheaper for savers to withdraw cash directly from their pension funds, rather than buying an annuity, while new 'Pensioner Bonds' will pay enhanced interest rates to savers over the age of 65.

The changes represent arguably the most far reaching reform to the taxation of pensions since the regime was introduced in 1922, Mr Osborne explained.

"The message from this Budget is this: you have earned it, you have saved it and this government is on your side," he commented.

The chancellor also used the Budget to confirm that the personal allowance for income tax will rise to £10,500 from April 2015, while the starting point for the 40p rate of income tax will rise only rise by one per cent a year, to enable more middle-income workers to be pushed into the band.

The measures were tempered slightly by a warning from Mr Osborne that a delicate balance between optimism and the need for more austerity needs to be struck.

Despite forecasts for British economic prosperity increasing, the government will continue to spend much more than it raises in tax, which will likely mean more cuts after the election, Mr Osborne indicated.

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