22/03/2014 Your Money

We will be looking at pensions and the small print and work out who is

affected by what and when. As always, the full Your Money service.

It was a day last Wednesday. What will be be talking about?

Take a wild guess. More freedom for pensioners to spend

the money you've saved during your working life. Scrapping the need for

an annuity, that's what the Chancellor George Osborne announced

in his Budget this week ` wanting to give people more control in how they

manage their income after retirement. But will you be able to

manage your retirement money? And keeping more of the interest you

earn out of the taxman's hands. A big leap in the amount of money we

can put in tax efficient ISA accounts. But are they worth the

money? We will get some advice. So the Chancellor's lifting the

shackles on pensioners, giving retired people who've saved more

freedom to decide what to do with the money in their personal pension

pot. Quick, Maud, book that cruise! George Osborne wants to get rid of

rules that effectively force most retired people to swap some of their

pension savings for an annuity ` an investment that pays a guaranteed

income however long you live. 90% of people who retire buy an

annuity with their pension savings. Years of low interest rates mean

they've not been getting much for their money. The Chancellor says he

wants to change the rules so instead of buying an annuity retired people

can live off the cash they've saved and/or take that money and invest it

in something else. He says he'll scrap the 55% tax charge that

currently stops people from taking more cash than they're allowed from

their pension pot after they retire. Malcolm McLean is a pensions

industry consultant at Barnett Waddingham. For 13 years, he was

Chief Executive of the Pensions Advisory Service. Sarah Pennels is

editor of the website Savvywoman.co.uk full

for people who have. It is not for people on a guaranteed

works pension scheme linked to their salary ` not teachers, civil

servants, police etc. Absolutely. It is people who are built up a pot of

money over a number of years. At the moment, they have to use that pot to

get an income for themselves in their retirement years. In many

cases, that means taking out an annuity. Over the last four years,

annuity rates have been on a slide and things have not worked very well

in the market. What the Chancellor said is that instead of having to

abide by a number of restricted rules on this, people will be given

freedom to decide for themselves what to spend that money on. I think

it is not as revolutionaries to think that people who have been

saving money all their lives, to allow them to decide how they want

to spend that money. They will possibly, probably need advice, it

is the best thing to do as there are tax implications if you draw out the

money. I keep reading about people saying that people buy flash cards

and cruises and things. If the do that, they will pay a lot of tax. I

don't think people will do that. Thinking long`term, this is going to

become for them a budgetary issue, rather than a pension one. They need

advice and they'll get guidance, the Government says, from various

sources. If you have retired already, are you affected by this?

If you've already bought your annuity, too late for you.

You get a 30 day cooling off period, but in the last couple of days, a

number of annuity providers say they will be extending back to 45 or 60

days, so the first thing to do is check with them. Malcolm's point is

it is not about taking the money and spending it on living the high life,

it means taking the money and reinvesting it, maybe just putting

it in the bank. Maybe in some cases, buying an annuity. That's right.

We're not going to see the end of annuity is because people can take

money from their pension fund. People with pension pots that are

small cannot afford to take risks. If you put money in the bank at the

moment with interests rates as they are, you're losing money because of

the inflation rates. If people feel better being in charge of their

money, they may come back to buying an annuity. What can people do today

to make the most of these changes? From the 27th of this month, some of

the restrictions will be lifted. You will be able to take more of the

money out in cash. But the full change actually comes in when the

old shackles are off from April 2015, so that is some time off. In

the meantime, people need to think carefully. For some people, and

annuity will still be the right answer, it will give them peace of

mind throughout their retirement, and if they do live longer than

expected, and many people are living into their 90s, they will make a

profit on it, but nobody knows how long people live, so it is a gamble

either way. The rule is, never take the first year offered, shop around.

You mentioned that from the 27th of March, you can take more. 25% of

that will be tax`free and the rest will be taxed when you draw it out

at your marginal tax rate. Another phrase in the budget that chills the

heart, flexible drawdown rules. It means that the moment, there are

limits on how much you can take from your pension unless you have a lot

of other income coming in. It is set at 120% of the annuity rate. From

next week, you can increase the amount you take, but that doesn't

this is certainly mean it will be the right thing for you to do. You

have written about it on your website. Thank you for sharing your

expertise. Some other things of interest to the

golden generation ` if you're paying 10p in the pound in tax on the

interest you earn from your savings, that's being cut to zero. Fed up

with low interest rates at the bank? National Savings is to launch a new

Pensioner Bond. Interest rates are expected to be 2.8% if you lock your

money up for one year ` 4% if you take out the three year bond.

Crucially, it doesn't look like the rate will be linked to inflation, so

if prices rise sharply, you'll be left behind. And the amount you can

save in Premium Bonds will go up from 30 grand to 40 grand in June,

and up again to 50 grand next year. Of course, there are no interest

payments there, but the second ?1 million monthly prize is being

brought back. And don't forget this. The tax on bingo is cut in half to

1%. That brings it into line with other gambling taxes. Rank has

already said that will allow it to open three new bingo halls. Tax on

Scotch whisky, spirits and cider has been frozen. And there's a penny off

the pint ` tax on beer cut by 1p, but the tax on cigarettes is up

again. Did you think that was all? Silly billy. Workers will be able to

keep more of their money before paying tax ` the point at which we

start paying income tax will rise to ?10, 500. The starting point for the

40% tax rate will rise by just under ?1,000 to ?42, 285. And up to two

million parents who work are to get more help with their childcare

costs. From September next year ` 2015 ` they'll get vouchers worth up

to ?2,000 a year. The thrupenny bit is back ` though this time it will

be cold the new one`pound coin. 12 sides will apparently be harder to

forge. And double good news for drivers. The Chancellor cancelled

the next planned increase in fuel tax. Meanwhile, the AA says petrol

prices are now at their lowest levels in three years. They could be

an extra ?150 million to help people build their own homes. And tax

relief could be cut if you put your money into solar energy schemes.

Details on the government website. News for savers now. We can put more

money into tax efficient ISA accounts. That is if you've got the

spare cash. And if you know what an ISA actually is. Many people don't.

Here's Alice Baxter. To save or not to save. When it

comes to putting your hard earned cash into a tax`free ISA, analysts

and politicians tell us it is a no`brainer. But of the 30 million

Britons entitled is to them, less than half a subscribe. And do enough

of us even know what's an ISA is? It's to do with money in the bag.

I've never heard of it before. Do you think you pay tax on them? I do

believe you pay tax. Did you know you can open up a new ISA every

year? I didn't know that. A lot of people don't really understand what

an ISA is. The stocks and shares ISAs, you can invest in Germany may

go down as well as up all stop I had a lady other weekly didn't realise

you were allowed to have one ISA per tax year. A lot of people don't even

know what a tax year. Getting your head round the financial jargon is

daft, but the numbers speak for themselves. You could get ?100,000

of tax`free income. For a cash ISA, you would get ?20,000 of tax`free

interest. No one will have a single new ISA. Should this be taken as

further encouragement for savers? Absolutely. It is a simplification

of the rules and erasing of the limits to a sensible level of

15,000. It is nice and simple. The message is, when it comes to ISAs,

either reduce them or lose them when it comes to the end of the tax year.

It doesn't matter how much you have to save, you could have ?1000 or

?100 or ?5, the more you can put away into your ISA piggy bank, the

more you are giving away from the taxman and keeping for yourself.

Alice Baxter, saving for a rainy day in London.

So ` two big changes for ISAs in the Budget. The difference between a

shares ISA and a cash ISA is being scrapped ` now it's just going to be

one big pot with shares and cash. And the pot itself is getting a lot

bigger, if you want ` the amount we can pay in will jump to ?15,000.

Claire Walsh is from Pavilion Financial Services.

Having one big pot should make things easier to understand.

Hopefully. 15,000 is a nice round number. Has been confusion over ISAs

in the past, about some of the limits restrictions. You can open an

ISA each at tax year, seeded open one now and then another after the

5th of April. It will go up in July to 15,000. The change from two types

of ISA to one type of ISA, is that also in July? Yes. If if you look at

cash ISAs, the interest is below what you would get in a current

account. I think it is about shopping around. Interest rates are

historically low at the moment, but what I'm courage people to do with

cash ISAs is shop around and look for long`term rates. If you need to

get the money out, you will lose a little bit, but chances are you

probably won't. If you take money out of ISA, you can't put it back in

if you've picked your annual allowance. Yes, you have to wait

until the following tax year. Withdrawing money is not a good idea

for a lot of people, but you can transferred it to another account if

you find it as being a better rate. Yes, people come to me and they have

been shopping around and they have several ISAs with lots of different

institutions. It is easier to manage if you can consolidate them, but

that takes a bit of work. Thank you very much. That's all from Your

Money's special look at the Budget. If you mist anything or want more

detail ` a good place to start is the Your Money bit of the BBC's

website ` bbc.co.uk/money. Normal money service throughout the week on

Twitter. We're back next week. Thanks for watching today.

Most of us will get to see some sunshine today, but there will also

be showers, with the cold