Osborne woos the grey vote in boost for savers

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After years of watching their finances depleted by rock-bottom interest rates and rising inflation, savers were finally offered some cheer by the Chancellor yesterday as he unveiled a raft of new savings schemes alongside the most sweeping reform of pension taxes in 100 years.

The strict rules which prevent most people from raiding their pension pots have been relaxed, allowing pensioners with ‘defined contribution’ funds to draw down as much money as they like without paying a “punitive” 55 per cent tax rate. Instead, they will pay normal rates of tax.

The measure is certain to have a huge impact in Yorkshire, where hundreds of thousands of people will now be able to spend their pension funds as they see fit. However shares in pension providers – including York-based Aviva – dropped sharply as the Chancellor unveiled his plans.

Mr Osborne also unveiled new flexible ISAs, allowing people to save up to £15,000 cash tax-free and to transfer money between their existing cash and stocks-and-shares accounts.

He also announced new higher-interest savings bonds specifically for over-65s, extended premium bond limits, and launched a free Government-backed pensions advice service.

“The message from this Budget is: You have earned it, you have saved it, and this Government is on your side,” Mr Osborne told the House of Commons, to a backdrop of Tory cheers.

As expected, following pressure from the Liberal Democrats Mr Osborne pushed the personal income tax allowance up to £10,500 in the Budget’s single most costly measure. But he resisted pressure for a more significant increase in the 40p income tax threshold, which rises marginally to £41,865 next month.

The Chancellor also laid the groundwork for a major political battle at the May 2015 election, by announcing a £119.5bn cap on annual welfare spending. Labour immediately agreed to back the policy in a Commons vote next week. But with the Tories already committed to further sweeping cuts to welfare after the election, Labour may now be forced to spell out precisely how much it too would plan to spend.

Hailing the success of the Coalition’s austerity programme, Mr Osborne said the British economy will grow by a better-than-forecast 2.7 per cent in 2014.

“With the help of the British people, we’re turning our country around,” he said.

The Budget contained several eye-catching crowd-pleasers, including the scrapping of the duty escalator on wine and spirits, a penny off a pint of beer, and a £200m fund to repair pot-holes –although tobacco taxes will go up by two per cent above inflation.

In another move designed to woo older people, duty on bingo halls will be halved to 10 per cent.

There was also a further £140m for flood defences, on top of the emergency funds announced by Ministers last month.

But Labour leader Ed Miliband said that for all Mr Osborne’s warm words, most people’s wages are still not keeping pace with the rising cost of living.

“The Chancellor spoke for nearly an hour, but he did not mention one central fact: The working people of Britain are worse off under the Tories,” the Doncaster North MP said.

• Podcast: Informed debate with Terry Jones, managing partner and head of tax at the Yorkshire office of accountants BDO.

SIMPLY CLICK HERE TO PLAY NOW or, if you prefer, DOWNLOAD FOR LATER (Right-click and choose Save Target As...)

• Real-time coverage at yorkshirepost.co.uk/budget.