It was a speech that left the opposition stunned and many in the industry equally as surprised. Compulsory annuity purchase was scrapped, while Isa cash and investment limits were merged and raised to £15,000 in a dramatic move towards trusting people with their own finances.
Mr Osborne said: “People who have worked hard and saved hard all their lives, and done the right thing, should be trusted with their own finances. And that’s precisely what we will now do. Trust the people.”
In a bid to ensure this trust does not result in more people making poor decisions, the chancellor also revealed that nobody would be forced to buy an annuity and would have the “right to advice” and confirmed government will spend £20m over the next two years consulting with industry on how this is delivered.
There will also be a new guarantee that everyone retiring on defined contribution pensions will be offered “free, impartial, face-to-face advice”.
Janet Davies, joint founder and managing director of care fees advisory network Symponia, said: “For leading people towards proper long-term planning with the help of experienced and qualified advisers, we thank the chancellor.”
Chris Hannant, director general of the Association of Professional Financial Advisers, said: “At first glance it looks like the government wants to provide guidance to people rather than advice.”
Mr Osborne also unveiled major changes to the tax regime, which require a separate Act of Parliament, planned to be in place for April next year.
As part of the pensions revolution, he ditched income drawdown limits. From 27 March, the income requirement for flexible drawdown will be cut from £20,000 to £12,000; the capped drawdown limit will rise from 120 per cent to 150 per cent; the lump-sum small pot will rise five-fold to £10,000; and the total pension savings allowed as a lump sum will almost double to £30,000.
This was met with positive reaction from the industry. Ros Altmann, independent pensions expert, said she was “almost speechless”, adding: “There are so many good news aspects for pension savings in this Budget that it is hard to know what to pick out. The overall message is, pension savings are going to be more flexible at the point of retirement.”
The 25 per cent tax-free lump sum will remain, but instead of the current “punitive” 55 per cent tax regime, anything else you take out of your pension will be taxed at normal marginal tax rates.
Andy Bell, chief executive and actuary at AJ Bell, said it was “fantastic news for pension
Mr Osborne also announced a new Pensioner Bond paying “market-leading rates”. This will be issued by National Savings & Investments and will be available from January next year.
Andy James, Head of Retirement Planning, Towry, said: “The Budget provided fundamental changes to the structure of retirement funding in the UK. ‘Flexibility’ has been the buzzword.”
The cap on premium bonds will be raised for the first time in a decade from £30,000 to £40,000 this June and to £50,000 next year while the number of million-pound winners will be doubled.