Retirement planning – Relief over pensions tax relief, ISAs take the spotlight

Those saving for retirement will have been relieved to hear the Chancellor’s Budget announcement that there will be no changes to pension tax relief. Following consultation on the issue it was found that there was “no consensus” on the proposed changes, and consequently they have been dropped for the time being, with the government’s focus for its policy on “Strengthening the incentive to save” shifting to ISAs…

The annual ISA allowance will increase from £15,240 to £20,000 from 6th April 2017.

In addition, from 6th April 2017 it will be possible for adults aged 18-40 to open a Lifetime ISA. The new Lifetime ISA will attract a government bonus of £1,000 per year for those who save £4,000 per year provided the conditions are met. The conditions are that the funds must be used either for the purchase of a first home (so long as the value of the property does not exceed £450,000) or for retirement on reaching the age of 60 or being diagnosed with a terminal illness. If the funds are withdrawn for another purpose the bonus will be lost (plus any interest or growth on the bonus), and there will be a 5% penalty.

The legislation will be published in the autumn after consultation with ISA providers.

If you would like further information about the announcements made in Budget, please contact the partner at Hunters with responsibility for your legal matters, or any other partner in the Private Client Department.