It's that time of year again; the 2014 Budget has now been released. The latest announcement from George Osborne puts savers "at the centre", highlighting a range of new measures that will affect future finances. Geared towards the over 50s, this year's Budget includes big changes to private pensions, some of which are coming into effect before the end of next week while other more radical changes are proposed to take effect from 6 April 2015.
These changes open up significant opportunities for more people, reinforcing the importance of seeking financial advice. To help you digest what the proposed changes mean, we list below the major changes and what yesterday's Budget signifies for the over 50s.
From 27th March 2014:
- Flexible drawdown minimum income requirement reduced to £12,000 from £20,000.
- Maximum capped drawdown income increased from 120% to 150% of max GAD rate.
- Trivial commutation increases from £18,000 to £30,000.
- The size of small pension pots that can be taken as a lump sum is increasing to £10,000 from £2,000. Three pots of this size will be able to be taken by an individual, an increase from two.
From April 2015:
- No requirement to purchase a pension income at retirement.
- 25% pension commencement lump sum remains with the residual fund available to be withdrawn in full at marginal rate of tax.
- No minimum income requirement.
- Review of death benefit lump sum tax charges (currently 55%)
- Consultation on dependents pensions
- Increase in minimum pension age to link to state pension age in 2028, which will be 57 at that point.
- Levy on pension providers to pay for face to face advice for all at retirement.
Non Pension Changes:
- The amount individuals can earn before tax will rise to £10,500 in 2015, with the personal allowance increasing to £10,000 next month.
- The existing cash and stocks ISAs will be merged to create a single ISA, with an increased annual limit of £15,000 in July 2014.
- The higher rate income tax threshold will rise from £41,450 to £41,865 in April 2014 and then by a further 1% the following year.
- From January next year, a pensioner bond from NS&I will be open to everyone over 65. A maximum of £10,000 can be saved in the bond, with possible rates of 2.8% for one-year bond and 4% for three-year bond.
- The amount of Premium Bonds an individual can own will rise from £30,000 to £40,000 in June 2014 and £50,000 in 2015. The number of £1m winners will also be doubled.
- The 10p tax rate for savers will be abolished.
- Police, firefighters and ambulance crews killed on duty will be exempt from inheritance tax.
- And finally, keen Bingo players will benefit from a reduction in bingo duty from 20% to 10%.
More details will come out over the following days and we will be informing those of our clients that will be affected as and when necessary.
If, however, you have any questions regarding the forthcoming tax and benefit changes, please feel free to contact Retirement and Investment Solutions.