Responding to yesterday's Budget announcement by Chancellor George Osborne, Patrick Haines, Regional Head of Advice at Close Brothers Asset Management comments: “This was a better than expected Budget from the Chancellor – keeping a hand firmly on the tiller to guide UK Plc as the fragile economy improves, whilst ensuring sufficient carrots were given to the often-mentioned ‘hard working earners’.
"The ground breaking policy change for ISAs should boost further saving as the economy improves and earners find they have just a little extra remaining at the end of the month.
"The merging of Cash ISAs with Stocks & Shares ISAs has addressed an anomaly in the tax-free saving system with the limit increased to £15,000 – making the ISA route an even more attractive haven for savers.
"Junior ISAs also received an increase to £4,000.
"The potential cap on lifetime funding of ISAs was not announced today – this is significant as such a limit would have sent completely the wrong message to savers.
"But the more significant news was related to pensions. "While there was greater flexibility in the way in which pensioners can access their retirement pots, the significant risk is that many will take an unsustainable amount of income early on which will reduce their income source later in life – potentially to nil! ‘Pension unlocking’ is currently taxed at 55% on the excess over 25% of the pension fund drawn as tax-free cash.
"This punitive rate will be replaced by each individual’s highest marginal rate which, in many cases, will mean a charge of just 20% even though the excess is being taken as cash.
"Inflationary increases to the Personal Allowance will help as it continues to rise from £10,000 next tax year to £10,500 in 2015/16 but these measures are small and will hardly impact people’s wallets.
"What was a surprise in today’s Budget was the Chancellor’s acceptance of the ‘middle-earner squeeze’ which has occurred in recent years.
"He has addressed this by increasing the 40% threshold from the current £41,450 to £41,865 in 2014/15, increasing to £42,285 in 2015/16. The numbers may look small but this is certainly a move in the right direction and an acknowledgment from George Osborne that middle-earners have felt disenfranchised in recent years.”
Nancy Curtin, Chief Investment Officer of Close Brothers Asset Management adds: “We saw sound and fury signifying more change than expected from this year’s Budget.
"Realistically, Osborne had to make the most of very little.
"Five years ago, the deficit was expected to reach half the level it is at now, and although the UK is in economic recovery mode, there is little room to deviate from fiscal tightening.
"That said, upbeat revisions by the OBR put a spring in Osborne’s step, reaffirmed that Plan A is working, and provided an early electoral platform to highlight the progress made on reducing the deficit.
"While there were no seismic economic changes that will substantially move the markets, staying the course will be seen as good for gilts, and will mean that monetary policy is likely to remain accommodative for longer. There is no free lunch in an indebted world. A Labour led looser fiscal policy would simply mean tighter monetary policy.
“More encouraging still are the steps the government are taking to promote the more balanced recovery needed.
"Trade is still a long way from the Chancellor’s pipe dream of £1 trillion in exports by 2020.
"While the global environment is still challenging, strengthened support for UK Trade and Investment, doubling export finance available and cutting interest rates for exporters by a third, and additional relief to energy intensive firms should go some way towards building more momentum.
"Sluggish business investment also remains a hurdle to faster growth, and it is still a fifth below peak levels.
"The extension and doubling of the annual investment allowance should help here.
"In conjunction with the forthcoming reduction in corporation tax, operating conditions for firms are improving, which bodes well for GB plc and for UK equities.”