Budget 2016 – As You Are For QROPS And Pensions

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Savings, pensions and investing were not at the top of the agenda for Chancellor George Osborne in his Budget 2016, but he did manage to pull off a surprise boost for younger savers.

After abandoning his expected change to pension contribution relief, for once Osborne managed to keep his hands off major pension reform.

He limited his changes to some small tweaks of flexible access rules to clarify some technical points – but pulled the rug out from under the market with his Lifetime ISA.

Not only is he increasing the personal ISA savings limit to £20,000 for every saver, but the new ISA is aimed at encouraging younger people to save.

Anyone under 40 on April 6, 2017 can save £4,000 a year and pick up a government top-up of £1,000.

How the lifetime ISA works

The ISA can stay open until the saver is 60 years old and the money can go towards a deposit for buying a first home or retirement savings.

“There’s no choosing what you are saving for any more,” said Osborne.

“The ISA gives savers the chance to put money away for a house deposit or a pension.

“For the ordinary taxpayer, the ISA is the same as tax free savings into a pension, but unlike a pension, no tax is due when the money is taken out.

“For the self-employed, it’s a product that’s not available on the market today. You can access your money any time without the bonus and a small charge.”

The Lifetime ISA is not open to expats.

Pension tweaks

Osborne made no mention on overseas pensions or QROPS in his speech.

The welter of policy documents published with his speech also omit any details of changes to QROPS pensions.

Retirement savers aiming to cash in their pensions will have the chance to draw £500 from their fund to pay for professional retirement advice from April 2017.

A consultation will follow soon asking for a definition of financial advice and guidance on when savers should see an adviser.

The pensions industry is also expected to deliver plans for putting a pensions dashboard in place online for every retirement saver by 2019.

No further changes were announced to the annual allowance for contributions – still £40,000 – of the lifetime allowance. Which remains at £1 million.

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