Helping savers in Norfolk

Many of us in Norfolk know that savers have been taking a hit for years. Gordon Brown’s pension stealth tax fundamentally destroyed the trust of savers in the state. More recently, pensioners and savers have been clobbered with the rising cost of living, taxes and low interest rates, as we all pay the price for Labour’s Great Recession. Today, we started to rebuild incentives for savers. With the recovery now gaining ground, the Chancellor made sure that support for savers was at the centre of the Budget.

Today’s budget helped hard-working savers in numerous ways. First, it made 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. The 1980s Conservative revolution in PEPs and ISAs helped millions of people save and invest in shares. Gordon Brown’s taxes killed it.

Secondly, the Government abolished 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.

Thirdly, there will be 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, far more than pensioners are currently getting. 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.

Today’s Budget also increases pension flexibility through the most far-reaching reform of pension taxation in a century. From April 2015, the Government will completely reform the tax treatment of pensions for people with defined contribution pension schemes. No one will have to buy an annuity if they don’t want to. Those who still want the certainty of an annuity can shop around for the best deal.

We’ve scrapped the 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, in law, will mean everyone who retires on these schemes will be offered free, impartial, face-to-face advice. This will make sure people get support on how to get the most from the choices they take.

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 small pot that can be taken as a lump sum five-fold to £10,000. And increase the number that can be taken from two to three; and almost double the size of total pension savings that can be taken as a lump sum to £30,000.

As the Chancellor said, the UK has been borrowing too much and saving too little for far too long. The hard-working savers in Norfolk and beyond, those who have paid into the system all of their lives, were victim of New Labour’s grab-and-run tactics. Today a Conservative Chancellor announced the largest set of measures for savers in recent memory. As the Chancellor said: ‘You earned it. You saved it. This Government is on your side’. Amen to that.

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