On the surface the Chancellor’s 2016 Budget looks like savers can look forward to some positive returns for the next financial year. With an announced increase in the ISA allowances and two new savings initiatives including the Lifetime ISA, is the future looking rosier for savers?
The Lifetime ISA represented the most significant change. Geared towards those under 40 to boost savings for retirement, the scheme will allow up to £4,000 to be saved (which will come out of their wider ISA allowance) with the government providing a further ‘bonus’ top-up of 25% (up to the value of £1,000). Sounds great, but as Menzies Wealth Management CEO, Ben Simpson commented in a recent feature for AOL Money, the new initiative may not be as big a deal as thought.
“Personally I wouldn’t be hugely worried. This is comparatively small change when set against the cost of say, Pension Tax Relief, which costs the treasury in the region of £50bn in Tax and NI relief.
Most interesting is the behavioural response that the Lifetime ISA might prompt – it is predicted that this provision might encourage more young people to “opt out” of their workplace pension in favour of funding their Lifetime ISA. Therefore, whilst HM Treasury will have some extra costs in terms of funding the “Government Bonus” on Lifetime ISAs, this might in reality be offset by a lower cost of tax relief on workplace pension contributions.”
Ben Simpson – CEO of Menzies Wealth Management
Read more about the implications of the Chancellor’s budget with Menzies summary and sector review.
Comments written by Ben Simpson – MWM CEO.
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