The Chancellor has delivered a radical Budget, with major changes to ISAs, encouragement for home owners and a proposed fundamental shake-up in the way that we access our pensions.
The main highlights dealing with the fastest-growing major advanced economy in the world are detailed below.
Watch our response to Budget 2014 in the Which? Money Podcast video special
Shake-up in savings
The Individual Savings Account (ISA) allowance is being changed to one single and simple £15,000 allowance, simplifying ISA rules to allow transfers. The 10p tax rate for savers is also to be abolished.
A new Pensioner Bond from National Savings & Investments will also be launched, with up to £10bn of these bonds issued and a maximum of £10,000 can be saved in each bond.
The Junior ISA allowance is increasing to £4,000 and transfers from CTFs to Junior ISA are set to be allowed from 6th April 2015.
Go further: Read more about savings changes from the 2014 Budget
Major changes in pensions
George Osborne announced some major changes to pensions. Defined contribution pensions will see big changes to the tax rules governing them. The income requirement for flexible drawdown will fall from £20,000 to £12,000 and the capped drawdown limit will rise from 120% to 150%.
The size of the lump sum small pot will rise five-fold to £10,000 and the total pension savings you can take as a lump sum will almost double to £30,000. There is also a proposal for the remainder of your pension pot to be taxed at 20% rather than 55% if you choose to take the 25% tax-free lump sum and don’t buy an annuity.
Go further: Read more about pensions changes from the 2014 Budget
Tax-free allowance to rise
The point at which people start paying income tax (tax-free allowance) will be raised to £10,500 from next year. In a slightly more populist move, Bingo duty will be halved to 10%.
The threshold for 40p income tax to rise from £41,450 to £41,865 next month and by a further 1% to £42,285 next year.
Go further: Read more about tax changes from the 2014 Budget
Help to Buy scheme extended
The first part of the government’s Help to Buy scheme, Help to Buy equity loans, will now run until the end of the decade. Government-backed Help to Buy equity loans are available to help people with a 5% deposit to buy a new-build property.
Mr Osborne also announced that 15,000 new homes will be built in Ebbsfleet, Kent, as part of a new garden city development.
Go further: Read more about housing changes from the 2014 Budget
Which? response to the Budget
Which? executive director Richard Lloyd said: ‘The Budget brings a welcome shake-up for struggling savers who too often get a raw deal. Hiking the Isa limit will encourage more consumers to save, although we also now need to see more competitive interest rates from banks that have slashed these repeatedly in recent years.
‘The overwhelming majority of people who buy an annuity from their existing provider could get a better deal on the open market, so today’s announcement should help stop millions of people from losing out on thousands of pounds of retirement income.
‘The key to making this work will be a requirement on providers to give consumers high quality, impartial advice on their options across the whole of the market, with maximum protection at this critical time in their financial lives.
‘Savers will welcome these moves on Isas and annuities, and we now look to the financial industry to raise their game by offering better value products and genuinely impartial advice, so that millions of consumers get the best possible return on their savings and investments.’