Budget 2016: How will it affect you?

Changes to pensions were predicted to be top of the agenda in yesterday’s Budget but George Osborne seemed to take a U-turn following rumours, a move which Pareto Financial Planning have welcomed.

With new policies on devolution, changes to business rates and £300m to improve infrastructure, the chancellor handed more powers to the North as well as encouraging young people to begin saving for their pensions with tax breaks and a new Lifetime ISA announced.

John Stevenson, director at Pareto Financial Planning Limited advises:

“The Budget has demonstrated it will encourage a culture of saving over borrowing for individuals as well as on a macroeconomic level.

“The annual ISA limit increase for the last 6 years has demonstrated the Government’s commitment to encourage equity investment and savings for population. ISAs are a simple product which people understand.

“ISA allowances now form a major part of financial planning advice and the limit has grown from £7,200 in 2008 to £20,000 this year.

“The introduction of the Lifetime ISA for under 40s could be seen as a simplified replacement for pension planning linked to ISA benefits but with the added bonus of a 25% contribution up to £4,000 – it’s a one tiered tax relief basis with no link to salary or income tax rate. People will understand the limit on withdrawals and will be encouraged to save. This is better than the complex rules in pensions which the public commonly mistrust.

“Pensions were left alone despite rumours circulating that there would be a reduction in tax relief and the removal of a 25% tax free lump sum. The seemingly annual changes to pensions increase mistrust and ultimately lead to reduced contributions. A long term strategy and simplified rules will change this so today’s announcement is a positive step to people saving for retirement.”

For help and advice on how the Budget will affect you, get in touch with Pareto FP, independent financial planners on 0161 819 1311.