“State Pensioners with £10,000 in Savings Advised to Prepare Ahead of Labour’s Budget Announcement.H
State pensioners with £10,000 in savings should be taking steps to protect their money, financial experts have warned.
Labour are set to deliver their first Budget (Image: Getty)
State pensioners who have £10,000 in savings are being urged to make the most of their savings allowances before this Wednesday.
Labour will on Wednesday, October 30, deliver its first Budget. As well as cutting £300 Winter Fuel Payments from pensioners, Chancellor Rachel Reeves is expected to deliver a range of financial schemes, plans, hikes and changes in order to raise £22billion to plug what the new government says is a gaping black hole found in public services.
And one such change that financial experts are predicting could come to pass is around ISAs.
An ISA is a type of savings account which allows people to shield their money from tax and can take the form of a traditional savings account which pays interest, either fixed or variable, or it can be a stocks and shares ISA in which a person can invest and have those investments protected from tax.
Right now, savers can earn £1,000 in interest before they have to pay tax at 20 percent on every £1 above £1,000, which is known as the Personal Savings Allowance.
And if you put away your state pension income into a savings account, and that account then generates interest, you can be charged tax on the interest generated.
If you put £20,000 away at 5 percent, you would generate £1,000 interest in just 12 months and be liable to pay tax on any interest over £1,000.
If you put just £10,000 into a two-year fix at 5 percent, you would also generate enough interest in that time to owe tax because all of the interest would be paid in a lump sum at the end of the period.
Instead, if you put the money away in an ISA, all of the interest is protected from tax.
But one change financial experts fear Labour could look at in this Budget is a change to ISA rules.
Right now, ISAs have a maximum limit of £20,000 per year. This can be in one ISA or split between several but it cannot exceed £20,000 in total.
However, financial experts are concerned that Labour could be set to change ISA rules in its Budget on Wednesday.
Hargreaves Lansdown’s Head of Personal Finance Sarah Coles said: “It’s worth noting that last year the Resolution Foundation, a research organisation that seeks to improve living standards for those on low and middle incomes, called for a lifetime cap on ISA savings of £100,000.
“Whatever happens in the Budget, now could be a good time to secure this year’s ISA allowance. Anything you’ve already paid in, or you pay in today, will be sheltered from UK income and capital gains tax.”
Such a lifetime cap could severely limit your ability to take advantage of an ISA’s tax allowances, as you suddenly only have five years of maximising the limit available to you, whereas before you could max it every year for the rest of your life.
State pensioners with £10,000 in savings should be taking steps to protect their money, financial experts have warned.
Labour are set to deliver their first Budget (Image: Getty)
State pensioners who have £10,000 in savings are being urged to make the most of their savings allowances before this Wednesday.
Labour will on Wednesday, October 30, deliver its first Budget. As well as cutting £300 Winter Fuel Payments from pensioners, Chancellor Rachel Reeves is expected to deliver a range of financial schemes, plans, hikes and changes in order to raise £22billion to plug what the new government says is a gaping black hole found in public services.
And one such change that financial experts are predicting could come to pass is around ISAs.
An ISA is a type of savings account which allows people to shield their money from tax and can take the form of a traditional savings account which pays interest, either fixed or variable, or it can be a stocks and shares ISA in which a person can invest and have those investments protected from tax.
Right now, savers can earn £1,000 in interest before they have to pay tax at 20 percent on every £1 above £1,000, which is known as the Personal Savings Allowance.
And if you put away your state pension income into a savings account, and that account then generates interest, you can be charged tax on the interest generated.
If you put £20,000 away at 5 percent, you would generate £1,000 interest in just 12 months and be liable to pay tax on any interest over £1,000.
If you put just £10,000 into a two-year fix at 5 percent, you would also generate enough interest in that time to owe tax because all of the interest would be paid in a lump sum at the end of the period.
Instead, if you put the money away in an ISA, all of the interest is protected from tax.
But one change financial experts fear Labour could look at in this Budget is a change to ISA rules.
Right now, ISAs have a maximum limit of £20,000 per year. This can be in one ISA or split between several but it cannot exceed £20,000 in total.
However, financial experts are concerned that Labour could be set to change ISA rules in its Budget on Wednesday.
Hargreaves Lansdown’s Head of Personal Finance Sarah Coles said: “It’s worth noting that last year the Resolution Foundation, a research organisation that seeks to improve living standards for those on low and middle incomes, called for a lifetime cap on ISA savings of £100,000.
“Whatever happens in the Budget, now could be a good time to secure this year’s ISA allowance. Anything you’ve already paid in, or you pay in today, will be sheltered from UK income and capital gains tax.”
Such a lifetime cap could severely limit your ability to take advantage of an ISA’s tax allowances, as you suddenly only have five years of maximising the limit available to you, whereas before you could max it every year for the rest of your life.
