Category: Personal Savings
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Salary sacrifice benefits workers

While little understood, it is widely used and would raise significant amounts for the government.

Andrew Tulley, pensions technical director at Retirement Advantage, said: "Although it looks like changes to pensions tax-relief are off the table for now, there are plenty of inventive ways the Chancellor can use our pensions and savings to help balance his books.

"But I can't see him making changes to tax-free cash as this is the holy grail of pensions, and really would be like turkeys voting for Christmas."

Savings confusion

We get £1,000 of savings interest tax free

It's tough for those trying to get any sort of return on their hard-earned cash as banks continue to offer pathetic interest rates.

The Personal Savings Allowance, which comes into force on April 6, offers a glimmer of hope. It means basic rate tax payers can earn pound;1,000 interest (pound;500 for higher rate tax payers) before they have to pay anything to the taxman.

Read more: What to look for on savings

This is in addition to the ISA allowance which remains at pound;15,240 for the 2016/17 tax year and applies to all non-ISA savings, peer to peer and current accounts.

Susan Hannums, director of independent savings adviser,, said: "Although the PSA is a good thing, because according to the government the majority of savers will no longer pay tax on the savings interest.

"But as we near the launch date some details are emerging that paint a not so positive picture regarding how the Treasury plan to collect any tax that is due on people's savings. It seems to be overly complicated and potentially flawed given that new tax codes are being issued now based on interest earned to date.

"Given that savings balances can fluctuate massively in a short space of time, it's not unreasonable to believe some savers will be out of pocket in the first year, or at least until they've corrected their own tax codes."

Earlier this week, the Prime Minister announced a new Help to Save scheme to encourage those on lower incomes to build up a rainy day fund.

It will be launched in April 2018 and will allow those on Universal Credit (with minimum household earnings equivalent to 16 hours at the National Living Wage) or people receiving Working Tax Credits to build up savings of up to pound;3,600 over four years.

Those eligible will be able to save up to pound;50 a month. And after two years the Government will pay a 50% bonus of up to pound;600, followed by another bonus of up to pound;600 two years later.

But, as with everything, the devil will be in the detail and that is yet to be confirmed. There are worries this may mean low earners opt out of longer term pension savings in return for the more flexible, but short-term Help to Save.

Royal London's director of policy, Steve Webb, said: "It is welcome that the Government is looking to encourage people to save, but it needs to be careful people are not incentivised to make the wrong choice with their money.

"While both short-term and long-term savings are important, low-paid workers with spare cash should think very carefully before assuming that the help to save scheme is the best deal for their money."

Benefits changes are coming