The Chancellor announced that he will be increasing the ISA allowance to £15,000 from 1 July 2014.
In a radical change, savers will be able to now put away £15,000 in the tax-free wrapper - and all of this will be able to be held as a cash ISA. The Government has dubbed the accounts New ISA - or Nisa.
Savers have previously been able to transfer accumulated cash isa savings to a stocks & shares isa but now for the first time, savers will be able to transfer previous years’ funds from stocks and shares ISAs into cash ISAs.
At present, savers can shield a maximum £11,520 away from the taxman (rising to £11,880 from 6th April). Half of this - £5,760 – can be held in a cash ISA, and the same amount in a stocks & shares isa. If no contribution is made to a cash isa, the full allowance can be put in a stocks and shares isa. These rules have created a great deal of confusion with the general public and building societies and other institutions have long campaigned for simplification.
George Osborne says the increase in the limit is a thank-you to savers that have made ‘sacrifices for economic security’ by putting up with rock-bottom interest rates. Of course, there’s no guarantee that these rates will be rising much higher for the foreseeable future so a cynical view might be that savers can now save even more at rock bottom rates!
Good news for pensioners - a New Pensioner Bond, paying "market-leading" rates, will become available via National Savings from January 2015 to the over-65s, with possible rates of 2.8% for one-year bond and 4% for three-year bond - up to £10,000 to be saved in each bond
Here, the Chancellor will be introducing some far-reaching changes.
Under current provisions, pensioners can elect to take up to 25% of their pension pot as a tax-free lump sum - if they wanted to take more than this it is taxed at 55% so most people will either purchase an annuity or go down the income drawdown route.
George Osborne said: "We will legislate to remove all remaining tax restrictions on how pensioners have access to their pension pots. Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want. No caps. No drawdown limits. Let me be clear. No one will have to buy an annuity."