View the article online at http://citywire.co.uk/money/article/a722986
Autumn Statement: NS&I to the rescue!
The chancellor had little to offer savers although National Savings & Investments emerged as a surprise winner of the mini-Budget.
NS&I, the state-owned savings institution, is in favour with the chancellor after a rise in the cost of borrowing money on government bond markets.
In his Autumn Statement George Osborne said NS&I, the well-known provider of premium bonds, was forecast to supply the Exchequer with £3.5 billion in financing in the current tax year.
This is a leap from zero forecast only last March in the Budget.
NS&I's financial contribution has shot up because savers have continued to buy its bonds and ISAs even though it has cut interest rates to the bone.
Such is the appalling state of the savings market that NS&I income bonds (1.25% gross, pre-tax interest) and direct ISA (1.75% gross) remain popular.
With money pouring in from savers while it pays less on interest, the Treasury has found NS&I is a cheaper source of funding than the gilt, or government bond markets, where interest rates – or yields – have risen this year.
NS&I reckons it will deliver around £350 million of savings to taxpayers as a result.
So even though you are getting a rotten return on your money, rejoice, you are contributing to the nation’s coffers!
According to NS&I, people must be saving more, despite the pitiful rates on cash. Chief executive Jane Platt said her agency’s share of the savings market had fallen to all-time low of 7.2%, meaning private sector providers are not losing out.
No justice for child trust funds
Given the government wants people to work for longer before claiming their state pension it was a shame there was not a bit more to encourage savers and investors, however.
The annual amount you can put in an ISA (individual savings account) has, as expected, been raised to £11,880 for 2014/15. Up to £5,940 of that can go in a cash ISA.
In a nod to retail bond investors the chancellor is cosidering allowing bonds with less than five years to maturity to be held in an ISA.
The chancellor also promised a new tax relief for investments in social enterprise, which will boost the sale of new social impact bonds from next April.
And in a boost to the investment industry Osborne said he would scrap stamp duty on exchange traded funds in a bid to get more of them to operate in the UK rather than Ireland and Luxembourg.
But the chancellor did nothing to remedy the injustice to the more than 6 million children with money stuck in child trust funds. CTFs have been in decline since the launch of junior ISAs which offer better rates and more investment options.
The government announced it was considering allowing people to transfer money from CTFs to junior ISAs (where the annual subscription limit will rise to £3,840 from £3,720). However, nothing further has been said since consultation on the topic ended in August.
Let's hope the chancellor does something about that in the next Budget if he wants the young to learn the savings habit.
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