“Simplicity, flexibility and generosity” was the theme for the Chancellor’s 2014 Budget.

19th March 2014

For individuals, George Osborne has announced that the income tax personal allowance will increase to £10,500 from next April on top of the planned increase to £10,000 next month; the starting rate for ‘savings income’ is increasing from £2,880 to £5,000 and the higher rate threshold by a further 1% to £42,285.

Despite rumours of a potential cap on ISA savings, the Chancellor has surprisingly announced an inflation busting increase in the ISA allowance, raising the present allowance of £11,520 to £15,000.  The ‘New ISA’ or ‘NISA’ will combine the current cash and stocks & shares allowances. Additionally, the new ISA will have greater flexibility allowing investors to switch between cash and stocks and shares.

The increased limit will be available from 1 July 2014 and at the same time Junior ISAs will also be increased from £3,720 to £4,000.

Perhaps the most radical announcement was saved for defined contribution pensions:

• As an interim measure until April 2015, the amount of secured pension required before flexible drawdown can be taken has been reduced from £20,000 to £12,000 per anum.
• From April 2015 anyone over the age of 55 will be able to take flexible drawdown with the option to withdraw the whole pension fund. 25% can be taken tax free and the remainder is taxed at their marginal rate.
• The trivial commutation limit will be increased from £18,000 to £30,000 from April and
• The triviality limit on pension funds will increase from £2,000 to £10,000 plus individuals will be able to cash three separate pension funds rather than the present two.

These changes will provide far greater flexibility and freedom in how pensions may be drawn and allows savers to make decisions based upon their own circumstances rather than be driven by the rules.

Freedom, flexibility and choice is great news for investors.  Should you require any further clarification or advice on your own particular circumstances, please do not hesitate to contact us.