LONDON (Reuters) - Companies managing the wealth of British retail investors were boosted on Wednesday after Chancellor George Osborne announced fresh plans to encourage people to save more.
The changes - raising the amount everyone can save tax-free and lending a special hand to younger people saving for a house or retirement - follow sweeping changes last year that gave individuals more control over their pension savings.
Under the new rules, Osborne said he would increase the savings allowance in Individual Savings Accounts (ISA) to 20,000 pounds ($28,138) a year from April, 2017, from around 15,000 pounds now.
Osborne also announced plans for a new ‘Lifetime ISA’ for those aged under 40, in which individuals could save 4,000 pounds a year. This would then be topped up by a 25 percent contribution from the government.
Over their lifetime, savers will be able to have contributions of 128,000 matched by the government for a maximum bonus of 32,000 pounds.
“For those under 40, many of whom haven’t had such a good deal from the pension system, I am introducing a completely new flexible way for the next generation to save,” Osborne told parliament in his annual budget.
“It’s called the Lifetime ISA. Young people can put money in, get a government bonus, and use it either to buy their first home or save for their retirement.”
Shares in leading British wealth manager St James’s Place were up 3 percent on the news, among the top FTSE 100 gainers, while Hargreaves Lansdown was up 1.5 percent.
Sounding a note of caution, however, Steve Webb, a former Liberal Democrat pensions minister who is now director of policy at Royal London, the largest mutual life, pensions and investment company in the UK, with Group funds under management of 84.5 billion pounds.
During his tenure, the Conservative-LibDem coalition government of the time sought to boost pensions savings, particularly among the young, a goal Webb said could be threatened by the rival product.
“Young savers who opt out of pensions in favour of a lifetime ISA lose the contribution from their employer and the chance to build a tax-free lump sum from a pension pot - how will they know which is right for them?,” he wrote in a note.
($1 = 0.7108 pounds)
Additional reporting by Sarah Young and Kate Holton; editing by Sinead Cruise and Jon Boyle