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Budget 2014 – good news for savers

This year’s Budget was aimed at Britain’s “makers, doers and savers” and there was certainly a few bombshells in what has been called the best-guarded Red Book in years.

The Chancellor announced tax changes affecting defined contribution pension arrangements, which look to scrap compulsory annuity purchase altogether and allow savers unlimited access to their pension pots. The finer details of this change will no doubt appear over the coming months. Essentially, it provides retirees with more choice but making the right one will undoubtedly require advice.

If savers are more inclined to withdraw larger lump sums earlier, no longer fearful of hefty tax penalties, alternative strategies might be more suitable, such as using a multi-asset vehicle or entrusting your portfolio to a risk-targeted model portfolio designed to generate income, for example.

There are many investment options to research and significant tax implications that must be understood. The funds industry may see this as an opportunity for product development, aimed at would-be annuitants.

A more flexible ISA regime, Junior ISA threshold lifted to £4,000, peer-to-peer loans included in the ISA allowance will all further boost UK personal savings. But as always with investing, a solid understanding of the inherent risks is necessary to make the most of the new landscape.

Like the advent of a new year, the Chancellor’s budget typically prompts thoughts of making sure our financial plans are still on track. For most people, the budget usually results in a few minor tweaks. The changes announced in this years budget mean that many of us are more likely to need a thorough review.