Spring Budget: How Could it Affect your Savings and Pensions?
Chancellor Philip Hammond recently announced plans for the Spring budget, as part of these plans new rules on pensions, individual savings accounts (ISAs), income tax and inheritance tax (IHT) are set to come into force on April 6. But what exactly do these changes mean for you and how could they affect your personal finances, in particular your pensions and savings?
As an experienced financial advisor in Lincoln we work in partnership with our clients to ensure they have the best savings and pension strategies in place for their personal circumstances and financial objectives. As new rules are brought into play it is understandable that many people will have questions about the changes and what they mean to them personally, so let’s have a look at what is likely to change and what it could mean to you.
What’s Changing with Pensions?
First the good news; both the basic state pension and new flat-rate state pension will rise by 2.5% on April 6. The basic state pension will rise from £119.30 to £122.30 – an extra £156 a year. Those on the new flat-rate state pension will see an increase in weekly payments from £155.65 to £159.55 worth an additional £202.80 annually. These 2.5% uplifts are slightly ahead of the forecast inflation rate of 2.4% for 2017.
Now for the not so good news; following last year’s cut to the Lifetime Allowance, the amount over 55s can invest in their pensions after making pension freedom withdrawals will fall from £10,000 to £4,000. This could affect you if you have to dip into your pension early due to giving up work to care for an elderly relative, those unable to work because of ill health and those that are made redundant.
If you are left wondering how this is likely to affect your personal circumstances it is always recommended to seek advice from a registered IFA, such as Castlegate financial advisor in Lincoln.
What’s Changing with Savings?
Younger savers will reap the benefits of the new Lifetime ISA (or LISA) launching on April 6. The new Lifetime ISA is designed to offer a generous incentive to those 18-39 who want to save for their first home or retirement. Individuals can save up to £4,000 a year and claim a 25% bonus of up to £1,000 – giving them a maximum contribution of £5,000.
Savers must open a Lifetime ISA before the age of 40 but can continue to save until they reach 50. This money can be used as a deposit on your first home, although there are restrictions on the value of the home and if withdrawn for any other purpose before the age of 60 savers will pay a 25% penalty. However, from 60 money can be taken without penalty as retirement income.
There was more good news for savers as the tax-free ISA allowance is set to rise from £15,240 to £20,000 for tax year April 2017/18. The chancellor announced changes to the personal tax allowance from the start of the tax year, with it rising to £11,500 – lifting many low-income workers and pensioners out of income tax altogether and the threshold for 40% tax will increase to £45,000.
At Castlegate, as an independent financial advisor in Lincoln and the surrounding areas, we can support you with all aspects of savings and pension planning to ensure you have the most effective and efficient strategies in place. As an experienced independent financial advisor in Lincoln we provide financial advice that is tailored and bespoke to you and your unique personal circumstances.
If you are looking for an independent financial advisor in Lincoln or across the East Midlands to provide advice and guidance on savings and pension planning, please do not hesitate to get in touch to talk about the most appropriate investments products for your personal circumstances and financial objectives.