Bonds, Isas and pensions: budget measures that affect consumers
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Version 0 of 1. These are some of the measures announced by Philip Hammond in the budget that will have an impact on savers and consumers. NS&I savings bond A “market-leading” government-backed savings bond paying 2.2% will be available for 12 months from April, the chancellor confirmed. The bond, which will be offered by National Savings & Investments, was first announced by Hammond in his November 2016 autumn statement. However, savers had been waiting for confirmation of the rate and the launch date. The government has previously said it expected about 2 million people to snap up the bond, which is aimed at those willing and able to tie up their money for three years. It will be open to everyone aged 16 and over and have a minimum investment limit of £100 and a maximum of £3,000. The Treasury said the bond would support savers affected by low interest rates, but Maike Currie at investment firm Fidelity International said: “Anyone saving into the new investment bond will struggle to achieve a real return, with Office for Budget Responsibility expectations for inflation to rise to 2.4% in 2017, and 2.3% in 2018, before falling back to 2.0% in 2019.” Isa limit increase Hammond also confirmed that, as previously announced, the annual limit on investments into all Isas would increase from £15,240 in the current tax year to £20,000 from 6 April this year. The Treasury said the government had almost doubled Isa limits since 2010. The government will also introduce the lifetime Isa on 6 April. This allows younger adults – those aged 18 or over but under 40 – to save up to £4,000 each year and receive what the Treasury said was a “generous” bonus of up to £1,000 a year on these contributions, which can be withdrawn tax-free to put towards a first home or when they turn 60. Pension freedoms The pension freedoms introduced by the government two years ago have raised five times more tax for the Treasury’s coffers than was originally forecast, it has been revealed. The reforms that took effect in April 2015 abolished the requirement to convert a pension pot into an annuity – a product that provides an income for life – and left older people free to do whatever they like with their retirement cash. However, those withdrawing large sums may well incur a considerable tax bill. It was initially estimated that the reforms would raise around £320m in 2015-16 and £600m in 2016-17 – but budget documents revealed the measure had raised far more than anticipated: £1.5bn in 2015-16, and an estimated £1.1bn in 2016-17. Stephen Lowe at specialist financial services company Just said: “People have been taking far larger average withdrawals than originally expected, which has meant much more has been paid in income tax.” Andrew Tully at Retirement Advantage added: “This is a tax bonanza for the Treasury and, though a welcome boost to government coffers, will have been a nasty surprise for many people taking advantage of the new freedoms.” Subscription traps crackdown The chancellor announced a crackdown on subscription traps that regularly trick consumers by turning a month’s free trial into a regular paid-for service. Hammond launched a bid to stamp out confusing small print and unexpected fees that can lead to people unwittingly waste their cash . The measures will be set out in more detail in a green paper later in the spring. |