Welcome to generation rent - forever. Financial experts are predicting a surge in buy-to-let investing as retiring pensioners, freed from having to buy annuities, pour the money into property instead, and in the process exclude the young (or those without help from the Bank of Mum and Dad) from the market almost permanently.
As accountant Mark Giddens at UHY Hacker Young said immediately after the budget: "With pensioners no longer being rail-roaded into investing in annuities, they will be looking for other higher-yielding investments – that inevitably means a huge boost to buy-to-let investments."
Make no mistake about who a budget focused on savings and pensions helps. Eight million households in Britain have no savings at all - hardly a surprise after years of falling wages. Of those that do, Halifax produces a useful table of where they live and it reads like a Tory map of Britain. The local authority where personal savings are highest is South Buckinghamshire, followed by Mole Valley, in Surrey, then true blue heartlands such as Windsor and Epsom. Every one of the top 10 locations for savings balances in Britain has a Tory MP. Where do people have the lowest savings? A roll call of Britain's poorest inner city areas, led by Hackney, Newham, Manchester and Barking and Dagenham.
The unexpected rise in the Isa limit to £15,000 a year - worth £30,000 to a couple - will enable the well-off to virtually ring-fence all their savings from tax over time. Before the budget speech, there were fears in some quarters of a lifetime cap on Isas, of maybe £1m. Now we can expect the number of Isa millionaires to boom in the next few years. The Treasury is calling them New Isas - Nisa for short - and they really couldn't be nicer for those who aren't strapped for cash.
The new pensioner bond will sell out in days. Osborne said it will pay 4% interest if pensioners are happy to lock their money away for three years - which is seriously higher than the current 2.7% best-buy rate available for savers and better even than the best five-year conventional bond. But there are only £10bn of pensioner bonds available under Osborne's giveaway, which is a small fraction of the sums held in savings accounts in Britain, so it is inevitable they will be snapped up straightaway.
The axing of the special 10% tax rate on savings up to £2,790 and its replacement with a zero rate on savings up to £5,000 will help, though.
The surprise death of annuities – with the chancellor allowing individuals to blow their pension savings on virtually anything they want – has sent share prices in the big insurance companies spiralling down. Apart from the inevitable flood of money into buy-to-let, maybe we'll also see more spending on cruising holidays, conservatories and caravans. Wherever the money goes, the chancellor is taking a huge gamble that pensioners are naturally prudent. Every other chancellor has resisted populist calls to banish the annuity, concerned with the moral hazard that the cash will be blown on fripperies, and pensioners will then fall back on the state for support.
The giveaway to well-off savers and pensioners will please rebellious Tory backbenchers, angry that Osborne has dragged ever more taxpayers into the 40% higher-rate tax bracket - but that problem isn't about to go away. With increases in the higher-rate limit of 1% a year, and wages rising at around 1.5% a year, more people than ever will fall into the higher tax band. If you are in the fabled squeezed middle – typified by one parent earning above £50,000 with a stay-at-home parent caring for the children – then the benefits from this budget are marginal at best. Britain's tax system has become heavily skewed towards supporting parents who both work, almost to the point of punishing those who choose to care for children at home.
The young, once again, are left with crumbs. The higher personal allowance (£10,000 this year and £10,500 next) will give something back, and there is some extra cash for apprenticeships, but that's about all. In an intensely political budget, the chancellor's message is clear; voters are rewarded, and they tend not be to 18-24 year olds.
