The Chancellor spoke of the importance of increasing savings. He told the Commons that he would consult on creating ISA-style pensions, where people would lose the tax relief when they pay in, but would be able to withdraw their money tax-free.
Likely to prove less popular are plans to reduce the lifetime allowance for pension contributions to £1million (down from £1.25million) from April 2016. The annual allowance for pension inputs will also be reduced for those earning more than £150,000 – tapering away to £10,000, down from £40,000.
There was bad news for those who rely on tax credits, which Mr Osborne said were subsidising employment in a way that had never been intended. Working-age benefits will be frozen for four years, although statutory benefits such as maternity leave will not be affected by this. In additional child tax credits will only support the first two children from April 2017.
Other radical changes to the welfare system will see the benefits cap reduced to £20,000 (or £23,000 in London) and no automatic entitlement to housing benefit for those aged 18-21.
In total, the shake-up of the welfare system will save £12billion by 2019-20.
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