Wednesday, 26 March 2014

Budget 2014

Budget 2014

Also viewable as a video at

One wag commented that settling down to watch the budget is now a bit like the FA Cup Final: A once great national event no longer quite so relevant.

As ever, my comments below are not political, so I’m not commentating on the team in blue and yellow who kicked off, or the reds, but on the game itself.

Pleasingly for me, I called #TieWatch correctly (almost) for the fourth year running. I went for ‘light blue’ and I sartorially I’d have to concede that George’s tie was bright blue. But I was close enough.

Like many people I saw the picture of the new pound coin in the morning before the budget and realised this was going to cost me money.  I’d now have to pay for a new stock library image on the front of the attached tax tables in 2017. A printed copy is available to clients.
Coin factoid. The new £1 coin is not though, the first 12 sided coin since the ‘thrupenny bit’ was withdrawn when I was born in 1971. A silver threepence is still manufactured in very small numbers by the Royal Mint for inclusion in sets of Maundy Money.

But onto the serious stuff (so not the beer and bingo, hardworking folks)

Looking at the dry numbers first, rather than the savings and pensions comment still to come, the Chancellor offered little in the way of surprises because his Autumn Statement was little more than three months ago. Nevertheless, the 2014/15 tax data cards (see link below) have had to cope with a range of tax changes, including:
·         The increased personal allowance of £10,000 and the £145 reduction in the basic rate band.

·         Another round of increases to company car tax.

·         Various changes to capital allowances, including the doubling of the annual investment allowance (AIA) to £500,000.

·         A further limited one year extension of CGT reinvestment relief for seed enterprise investment schemes (SEIS).

Tax Tables
I trust that you find the tax rates useful, and that you find them to be a helpful basis for a discussion with us about your financial future.  As ever, there is a download on the homepage of my website

Good to see the basic rate band increasing and for the first time in a while, an increase (albeit tiny) in the higher rate band. Call me a cynic but I suspect this was simply to ensure there wasn’t outcry over even more people being dragged into higher rate, as has happened over the last few years.

A nicer ISA?
Just the month before the budget we at Green Financial were lamenting the ridiculous numbers for ISAs, suggesting that rather than increase the allowance each year by a tiny amount (£11,520 to £11,880 this tax year) they should just make it £12,000 and leave it for a few years. So we were delighted to hear the news it will be £15,000 from 01/07/2014 and that much of the faffing about and silly rules regarding differences between cash and non-cash ISAs will go. The Treasury said “From 1 July 2014 ISAs will be reformed into a simpler product, the ‘New ISA’ (NISA) [IG: Geddit!?] , with an overall limit of £15,000 per year.”

It was also good to see the Junior ISA (JISA) amount will increase to £4,000 (from £3,720) and we look forward to the removal of silly rules around the old Child Trust Funds (CTFs)  and JISAs too, so the time when those two are merged and all children have access to the same product can’t come too soon.

As you know, I am all in favour of ‘Simplifying Your Finances’


Good that the 10p rate for savers has gone. For me, that was always just a trick part of an exam question. A needless piece of tax complexity. Good riddance.

National Savings

Excellent to see the return of competitive and safe products in the form of pensioner bonds but disappointing premium bond news.

I used to be a huge fan of premium bonds, they were a ‘must have’ component of many financial plans but the gradual erosion of the interest rate return and the change in prizes (basically more lower prizes more often, meaning you feel you win more times but the actual amount you win is less) means these just don’t represent good value and the fact you could now have more invested is not as good as it sounds. Don’t get me wrong, there is still a place for premium bonds but it’s the powers that be, not the holders that are the real winners at the moment.

While the exact details of the bonds for people aged 65 or over will be finalised in the autumn, the government’s current assumption is that NS&I will offer products which would pay rates of 2.8% gross/annual equivalent rate (AER) on a one year bond and 4.0% gross/AER on a three year bond under current market conditions, with an investment limit of £10,000 per product. These will be taxed in line with all other savings income.


This was the big one wasn’t it? The day before the budget I was speaking with a client and said, I can’t see them fiddling around with pensions AGAIN. I was right in so much that it wasn’t a fiddle but a bombshell. And a good news bombshell at first sight.HM Treasury themselves no less were quick to tweet “Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want”

I just hope it is true. So many times over the last decade plus, there have been headline grabbing pension announcements in the budget and then when the small print is devoured it transpires it wasn’t quite the deal we thought.

The Chancellor’s stated view was that by removing the effective requirement to buy an annuity, people will have greater flexibility in accessing their pensions.

This means that people can choose how they access their defined contribution pension savings; for example they could take all their pension savings as a lump sum, draw them down over time, or buy an annuity.

We’ve seen much fiddling with pensions recently, the backdoor stealth of lowering the lifetime allowance to essentially restrict upfront tax relief being one. Yet the pension announcements all seemed benign. Removing the 55% tax charge so one just pays one’s marginal rate of tax is fair and just and how it should have been to start with.

Annuities still have a place in planning for some people. A guaranteed income for life is not to be sniffed at. Remember my blog about the last survivor of world war one who had an annuity that paid him an index linked pension for 58 years? But annuities are not right for everyone and exceedingly poor value for most at the moment. At Green Financial we rarely recommend an annuity where an alternative exists. So it was great that the need to buy one has been completely removed but to restate what I said at the start of this section, I just hope the promised flexibility actually comes to pass.

Alongside this, the government is introducing a new requirement for pension providers to make sure that everyone retiring with a defined contribution pension pot receives free and impartial face-to-face guidance on the choices they face when deciding how to use their retirement savings. Surely good news for me!

In the meantime, as a first step towards the reform, the Chancellor announced a number of changes to the current rules that will come into effect from 27 March 2014. This will allow people to have greater freedom and choice now over accessing their defined contribution pension savings at retirement. These are:

  • reducing the amount of guaranteed income people need in retirement to access their savings flexibly, from £20,000 to 12,000
  • increasing the amount of total pension savings that can be taken as a lump sum, from £18,000 to £30,000
  • increasing the capped drawdown withdrawal limit from 120% to 150% of an equivalent annuity
  • increasing the maximum size of a small pension pot which can be taken as a lump sum (regardless of total pension wealth) from £2,000 to £10,000 and increasing the number of personal pots that can be taken under these rules from two to three

The linked graphic is how HM Treasury summarise the ‘budget for savers’

Summary and other stuff

I’ll produce further literature with all the other bits and bobs over the next few days. I’ll email it out to clients and put it on the website at and facebook at

The Chancellor said this was a budget “for makers, doers and savers”.

I’m off now to address all of those:

DOING my job

MAKING clients finances simpler and

SAVING them time, money and tax.

Local Award Billboard

Dear Clients and Blog Readers

A quick note to say thank you to those of you who left me a review on
As a result of your support Green Financial won the accolade of Best Rated Firm in South West London.  Something we’re really proud of and couldn’t have achieved without your help.  Thank you again.

The team at VouchedFor have twisted my arm and we’re shouting about our success through a billboard around the corner from the office, outside East Putney Tube station.  We’ll also be taking a press advert out in SW Resident magazine.

If you are passing or reading, we hope they catch your eye!

Thanks again,

My teenage son uses the tube station in question. He's not impressed...