The Budget 2018

Savings and Pensions

ISA limits

The ISA investment limit for 2019/20 remains £20,000 for a standard ISA. The limit for Junior ISAs and Child Trust Funds rises from £4,368 to £9,000.

The first Child Trust Funds were opened for children born in September 2002; they will mature in September 2020 when the child turns 18. The balance can be transferred to an adult ISA without affecting the annual ISA investment limit for that person.

Pension contributions (Table B)

There has been speculation that the Chancellor might reduce pension tax relief, which costs the Exchequer a great deal. However, the most significant change has been to reduce the impact of tapering of the maximum contribution to a pension scheme – the ‘Annual Allowance’ (AA). People with salaries over £110,000 and total income (including pension contributions) over £150,000 currently suffer a reduction in the normal AA of £40,000 down to a minimum of £10,000; the charge on contributions or increases in pension benefits above the reduced AA can create an effective tax rate of more than 100% for someone at that level who takes on extra work. Senior doctors have protested that it is not worth them carrying out operations, and the Government considered special measures to address that particular problem.

In the event, the Chancellor has changed the rules for everyone, raising the thresholds from April 2020 by £90,000 to £200,000 and £240,000. For someone above those higher levels, the AA of £40,000 will now be tapered down to a minimum of £4,000. The Government estimates that 250,000 people are affected by the AA charge, and the increases in the taper threshold will exempt many of them.

The Lifetime Allowance (LA) is the maximum amount that a person can save in tax-advantaged pension schemes. The value of benefits is measured against the LA when benefits are first taken from a pension, and also on some other occasions, including the individual’s 75th birthday. The LA will increase in line with inflation from £1,055,000 to £1,073,100 from 6 April 2020.