Osborne Offers Sweeteners for Savers in Pre-Election BudgetSarah Jones
Chancellor of the Exchequer George Osborne offered sweeteners for U.K. savers and retirees in his pre-election budget, introducing new savings products, tax allowances and greater freedom for owners of annuities.
The government will loosen rules on Individual Savings Accounts and introduce new savings products to help first-time homebuyers, he told lawmakers in London on Wednesday. Savers will also be able to receive as much as 1,000 pounds ($1,467) of interest tax-free, meaning 95 percent of taxpayers won’t have to pay tax on their savings, he said.
Low interest rates “has made it difficult for people’s savings to grow and that it has been harder to secure the income they expected in retirement,” Osborne said. “The government is now going further to reduce taxes on savings, and to give people greater flexibility over how they hold those savings.”
With Osborne’s Conservative party running neck and neck with the opposition Labour party in the opinion polls, the chancellor is seeking to bolster support from older voters and savers. Last year, he raised the maximum individuals can put into an ISA without having to pay tax as well as dropped rules that pushed people to buy an annuity on their retirement.
This year, he extended those rules to allow retirees to sell their annuities, a move that will affect 5 million pensioners, according to the government.
Individuals will also be able to withdraw and replace money into their ISA accounts without losing its tax-free status, Osborne said.
He also unveiled a “Help to Buy” ISA where the government will top up individuals’ savings to help them put down a deposit for their first house. The Treasury will provide a maximum of 3,000 pounds for 12,000 pounds saved.
St. James’s Place Plc, a British wealth manager that offers clients ISAs, and Hargreaves Lansdown Plc, which provides pension and savings services, jumped more than 5 percent on the announcement. Asset managers including Henderson Group Plc and Jupiter Fund Management Plc also rose in London trading.
“The changes are positive for the asset gatherer with the ISA regime further improved and more money likely to flow from annuities into investments over time,” said Jon Hocking, an insurance analyst at Morgan Stanley in London.
Even so, Osborne reduced the lifetime tax allowance, the maximum individuals can contribute to their pensions before paying tax, to 1 million pounds from 1.25 million pounds.