Actually
two major announcements for everyone to be aware of, and really important from
a financial planning point of view.
Firstly,
the ISA has (finally) been made simple and more relevant. Rather than
worrying about whether you go to a cash ISA or a stocks and shares and becoming
confused about the different levels, this has been done away with so that you
can either hold cash, or investment in the same account. This will make
it simpler, more straight forward and encourage people to save and not be put
off by perceived complexity. The additional increase to a nice round
allowance of £15,000 means that a couple can now shelter up to £30,000 of
savings and investments each year and not pay tax. Again this is really
welcome news and as I will point out later makes our savings system much more
straight forward.
Secondly,
the changes to Defined Contribution Pensions. This is a really
significant change. Most people now through auto enrolment will be being
placed into a defined contribution pension scheme. The Chancellor has
announced that these will become much more flexible. You will not have to
purchase an annuity, you will be able to draw out income when you want and to
the amount you want.
This
means that short and medium term savings could be carried out through ISAs and
long term retirement saving into what is beginning to look like a “big ISA with
tax breaks”, your defined contribution scheme. This is a much simpler set of
affairs for everyone going forward and actually runs the risk of looking joined
up.
Over
the longer term, I suspect (and hope) that this simplification will lead to
greater pension take up, now that some of the perceived inflexibility has been done
away with. And while I welcome the simplicity, people will still need to have
a comprehensive financial plan because this additional flexibility means that
the need to take advice is greater.
Matthew Phillips
Managing Director
Telephone: +44 (0)20 7893 3456
Email: getintouch [@] broadstoneltd.co.uk
Telephone: +44 (0)20 7893 3456
Email: getintouch [@] broadstoneltd.co.uk
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