FundsNetwork's response to the March 2020 Chancellor’s Budget announcement
Government's action to address the complexity of the Tapered Annual Allowance is a welcome move.
Changes to the Tapered Annual Allowance
- The Tapered Annual Allowance has proved one of the most complex features of the savings system. That was particularly true of high-paid NHS workers whose hours and pension accrual can be difficult to foresee. Given the urgent need to free up the health service, action on the Taper was expected and is welcome.
- Raising the earning limits before which the Taper applies goes a long way to alleviate the problem and, from April 6, no one earning below £200,000 will be caught. The vast majority of earners currently affected will now escape it.
- Further action on Pension Tax Relief may materialise but given the more pressing issues facing the Treasury and the need to girder the economy, it’s no surprise that more widespread action on tax relief has been shelved for now.
Increases to the Junior ISA allowance
- The more than doubling of the Junior ISA allowance to £9,000 a year was an unexpected savings boost. Many parents have resisted using Junior ISAs on account of the requirement that control of money contributed to them is handed to the child at 16, who can then withdraw the money at 18.
- None of that changes with an increase in the allowance, but an upper limit of £9,000 means that Junior ISAs are now a serious tool to save and invest for their future.
Important information: This press comment does not constitute financial advice, tax advice or legal advice or provide any recommendations. The value of investments and the income from them can go down as well as up, so you may not get back as much as you invest. Whether you are eligible to invest in a pension depends on your personal circumstances. All tax rules may change and the value of tax savings depends on personal circumstances. You cannot normally withdraw money from your pension until you are age 55. Parents or guardians can open the Junior ISA and manage the account but the money belongs to the child and the investment is locked away until the child reaches 18 years old.