Clues to Budget – savings?


A think tank linked to the Conservatives has published an interesting paper on ‘unlocking long-term saving’.   The Centre for Policy Studies (CPS) was founded in 1974 by Keith Joseph and Margaret Thatcher. Although the CPS says that it is ‘independent of all political parties’, it is generally seen – not surprisingly – as leaning to the right: its chairman (Lord Saatchi) and director (Jill Kirby) both have strong links to the Conservative party. Thus when the CPS publishes a policy paper, its contents are often read as potential Conservative policy and/or kite-flying.

The main proposals are:
A limit of £45,000 a year for tax-incentivised savings; a single annual contribution limit of £45,000 for ‘tax-incentivised’ saving (ie ISAs and pensions) is proposed, with the maximum pension contribution element set at £35,000. Full tax relief would apply to pension contributions, with ISA funds eligible for 20% tax relief if they are transferred to pensions.

Allow savers access to pension savings before retirement.Pension investors should be given a one-off opportunity to withdraw, tax-free, up to 25% of their pension savings before reaching retirement. The sum withdrawn would be deducted from their subsequent pension commencement lump sum entitlement.Annuities purchased with ISA-derived funds should be exempt from income tax, to provide consistency with the tax-free status of ISA withdrawals.Address gender inequality.Couples should be able to contribute to each other’s pensions with tax relief granted at the contributor’s marginal rate.Allow pension assets to be bequeathed free of IHT. On death, unused pension assets should be transferable free of IHT (perhaps limited to £100,000).  However, the assets should only go into the recipients’ pension arrangements.

Introduce a Junior ISA. The ISA should be extended to the under-16s, possibly labelled as a ‘Junior ISA’, with an annual savings limit of £1,200.

Wealthflow Comment – This may not be what we hear on 22 June, but it could be a clue to the direction that savings taxation will be taking in the next five years.

Duncan R Glassey
Senior Partner – Wealthflow LLP

[email protected]

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