As the financial year draws to a close we take a look at what may lie ahead in 2021. What is certain is that the UK government has some serious ground to make up when it comes to the country’s finances following the pandemic.
Each year the government spends billions of pounds on pensions tax relief, the annual allowance for which is £40,000. But this allowance has dropped significantly since 2010/11 when it was capped at a whopping £255,000. Given that such drastic reductions have happened to the pension allowance in the past, it stands to reason that this allowance could be in the firing line when it comes time for Rishi Sunak to make his cuts in the 2021/22 tax year.
And it’s not just pensions that are affected by allowances. Currently you can save up to £20,000 per tax year into an ISA and a further £9,000 into a Junior ISA, and the general consensus is that you should use this immediately or prepare to lose it. James Norton, a Senior Investment Planner at Vanguard has warned that ‘pension allowances could well change this year’. Mr Norton goes on to say that ‘when it comes to pensions, they have been targeted again and again and again in the past.’ Mr Norton urges savers to ‘Use your allowances now. Don’t wait until the end of March or the beginning of April. There is no point and there is no reason to wait – it really is use it, or lose it.’
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Following lockdown, a number of savers find themselves with extra cash in their account, largely due to the lack of spending opportunities. Britons are encouraged to save for their own retirement with the meagre State Pension being considered supplementary to private pension income.