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Budget Day Blues

Bingo players will be happy, smokers less so. Pensioners get a boost, while younger job seekers were largely ignored. It’s the usual post-budget day dissection: who are the winners and who are the losers?

Posted in: Finance
Close up of a 'budget' logo, hand-drawn in a notebook.

Typically where you gain on the one hand, you lose on the other and it takes clever online calculators to work out each household’s exact outcome. But whether they deem you a few hundred pounds better off here, or out of pocket there, in these post-recessionary, austerity-laden times it’s rare anyone feels much like a winner.

But a central element of George Osborne’s “makers, doers, savers” budget was to be found in the final one of that triumvirate. His headline-grabbing savings changes involve reforming and simplifying Individual Savings Accounts – better known as ISAs – so that the amount you can save in them increases to -15,000 and this can be used in cash, stocks and shares or any combination of the two. And just to reiterate the changes, they will be known as New ISAs or NISAs, available from 1st July this year.

At the younger end of the market the amount that can be paid into a Junior ISA for 2014 – 2015 will increase to £4,000 while 16 -18 year old savers will be able to make the most of the £15,000 limit in Cash NISAs, although they won’t be able to open a stocks and shares NISA.

“…the boost to NISAs means those lucky enough to have significant chunks of money to save, can do a little better.”

So despite the current paltry interest rates, the boost to ISAs means those lucky enough to have significant chunks of money to save, can do a little better. There has been a clear focus toward older savers in the 2014 budget with pensions being given new found flexibility.

In future, access to your pension pot will be freer with many tax restrictions removed as well as the need to buy an annuity. So pensioners will be able to cash in their pensions, with the taxable element taken as cash now charged normal income tax rate, instead of the 55% previously applied.

And new to the market is the Pensioner Bond, available from January next year to the over-65s, with up to £10,000 able to be saved in each bond, and interest rates of 2.8% for a one-year bond and 4% for a three-year being suggested.

But turning away from the silver-haired savers, there was some welcome news for young working families and the ever-increasing burden of childcare costs. The government is introducing a new scheme which will offer parents a 20% rebate per child for childcare costing up to £10,000 a year. The child will have to be with a registered childcare provider and parents will have to set up an online account. But it is estimated that up to 1.9 million families could be eligible for the scheme in the first year, which is available for children up to the age of 12.

One of the key benefits over the tax-free voucher scheme already in place is its greater reach. Under the current scheme only about 5% of UK employers are involved, meaning the vast majority are outside of the scheme, not to mention the self-employed.

So while the Employer Supported Childcare scheme will continue it will not accept any new members from August 2015. Parents will be able to switch from the old to the new scheme, but they won’t be able to be in both.

This, in conjunction with the increase in free early years schooling, could make a real difference and hard stretched working families might finally feel that there is something that benefits them.

Note: Whilst we take care to ensure Hub content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions.