Budget 2015: a series of mixed messages on savings
Ever get the feeling that when politicians put together the Budget, the left hand doesn't know what the right hand is doing? The last coalition Budget is a case in point.
Let's look at the evidence. Chancellor George Osborne proudly told us about his four step plan for a 'savings revolution' which included allowing savers to take money out of their ISA without losing their tax-free entitlement, a Help to Buy ISA and a new personal savings allowance.
All very welcome and almost an embarrassment of savings riches following the £15,000 ISA allowance and ability to pass ISAs to a spouse tax free that were announced last year. And of course let's not forget, the pension freedoms!
The other hand
Getting Britain saving is clearly what George wants to achieve. But wait, let's have a look at the right hand which is taking away as readily as the left hand is giving.
The lifetime allowance for pensions has been cut to £1 million from £1.25 million, the latest in a series of cuts that has seen the lifetime allowance dwindle from £1.8 million.
I'm sure most people won't lose sleep over that cut but it does send out some very mixed messages – Osborne wants us to save more, but does he want us to save into pensions?
There have been loud calls in the past couple of years for a merger of pensions and ISAs and I can't help but wonder if Osborne is edging closer to this idea. If he gets back to number 11 next year, will we see these two tax wrapper amalgamated into one large savings pot. Pensions expert Michael Johnson has already laid out the blueprint for it in one of his papers, providing a savings pot that will see you from cradle to grave while offering a flat-rate of government top up on your contributions – like your receive in a pension.
There would be certain restrictions on access to growth and the government top ups but the original capital you saved would be yours to use as and when you needed it – like an ISA.
Osborne knows that if saving is going to be attractive, he needs to let people get their hands on their cash and the pension freedoms coupled with the ISA changes meant that these two savings stalwarts are starting to look suspiciously similar.
Read more:
Budget 2015: pensions and savings changes explained
Budget 2015: what does it mean for you?
Budget 2015: the winners and losers
