State Pensioners with £10,000 savings have just hours to act before Budget

State pensioners with £10,000 in savings are being encouraged to maximise their allowances before the Budget. On Wednesday, October 30, Labour will present its first Budget after winning the General Election.

Chancellor Rachel Reeves is anticipated to introduce a variety of financial schemes, plans, hikes, and changes to 'restore economic stability' in the UK. This comes amid allegations that the Tories left behind a £22 billion black hole in 'unfunded pressures' which the new Government has now taken on.

Now, financial experts predict that one such change could be related to ISAs. An ISA is a type of savings account that allows individuals to protect their money from tax. It can be a traditional savings account that pays interest, either fixed or variable, or it may be a stocks and shares ISA in which a person can invest and have those investments shielded from tax.

Currently, if you put away your State Pension income into a savings account, and that account then generates interest, you can be charged tax on the interest generated. So, if you put just £10,000 into a two-year fix at 5%, you would also generate enough interest in that time to owe tax because it would be paid in a lump sum at the end, according to The Express.

Instead, if you put the money away in an ISA, the interest is protected from tax. The annual ISA limit is £20,000, which can be distributed across various ISAs but must not exceed the total cap.

Yet, there's growing concern among financial experts that Labour might propose changes to ISA rules in the upcoming Budget. Hargreaves Lansdown’s Head of Personal Finance Sarah Coles said: "It’s worth noting that last year the Resolution Foundation, a research organisation that seeks to improve living standards for those on low and middle incomes, called for a lifetime cap on ISA savings of £100,000.

"Whatever happens in the Budget, now could be a good time to secure this year’s ISA allowance. Anything you've already paid in, or you pay in today, will be sheltered from UK income and capital gains tax."

The introduction of a lifetime ISA cap of £100,000 would drastically reduce the opportunity to benefit from ISA tax allowances. It would limit individuals to just five years of maximising contributions, as opposed to the indefinite yearly potential previously available.

Meanwhile, Lewis Broadie, Savings Expert at NatWest, cautions against rash financial moves but advises keeping an eye on any ISA (Individual Savings Account) updates that may emerge from the Budget discussions. "Recent research, conducted by NatWest, found that almost seven in ten (69%) savers expect to earn interest on their savings this year and could be eligible to pay tax on the interest they earn," he said.

"With this in mind, it is definitely worth keeping an eye on any changes to the landscape and making sure you’re informed on the latest rules around contributing to your ISA." The annual statement, outlining the Government's future spending plans, will take place at 12.30pm Wednesday, October 30.