The lack of changes in the Autumn Budget to pensions and tax that would have affected high net worth investors (HNWIs) has been warmly received by those in the financial sector.
The investment and pensions industry expressed its relief at the decision not to move against rules in relation to pensions, as well as inheritance tax (IHT), despite pressure placed on the chancellor of the exchequer, Phillip Hammond, to find funding for the NHS and Universal Credit.
Hammond said during his speech: “I didn’t get into politics to put up taxes”.
Welcome relief
In general, most experts welcomed the lack of changes, but there was a distinct note of caution, given that a second budget could be rolled out in the event of a no-deal Brexit.
Vince Smith-Hughes, retirement income expert at Prudential, said: “The apparent lack of change in relation to pension rules is to be welcomed. Many of the rules such as the tapered annual allowance and lifetime allowance rules are already fiendishly complicated. Advisers should ensure that they are maximising the opportunities that exist for some clients here – this lack of tampering is unlikely to last forever.”
Chris Groves, partner in Withers’ private client and tax team, said: “In one of the most febrile political environments in living memory, the chancellor introduced a welcome note of certainty, emphatically stating that ‘I didn’t get into politics to put up taxes’. This will be welcome relief to HNWIs, but there remains considerable uncertainty as a result of the Brexit negotiations, which could see a new chancellor in No 11 or a change in government and considerable scope remains for changes in the future.”
Les Cameron, pensions and tax expert at Prudential, said: “Given the report into inheritance tax commissioned by the chancellor, it’s a little surprising we didn’t hear anything in this area. IHT planning should continue to be a booming area of financial advice. Government estimates show the trend of rising IHT receipts has continued. We’ve breached £5bn ($6.4bn, €5.6bn) for the first time and they will hit £6.9bn in 2023 and this should only increase consumers’ demand for IHT planning.”
Educational requirements
There was also a view within the industry that the government should have committed to further financial education of investors because the budget increased the incentive to save and invest.
Richard Stone, chief executive of The Share Centre, said: “The chancellor delivered the longest budget speech in a decade, but there was no mention of savings and investment, and while the government clearly expects people to have greater scope for saving and investing there were no further encouragements to do so.
“There was also no mention of, or commitment to, further financial education, as The Share Centre has called for, to help provide everyone with the skills needed to secure their, and their families, financial futures. This was a disappointment and The Share Centre will continue campaigning for the interests of personal investors and the need for improved provision of financial education, ensuring these vital issues remain in the spotlight until government acts.”
Pensions cold-calling ban
Hammond also announced during his speech that the delayed pensions cold-calling ban looks set to implemented. This will come after the government publishes a response to its consultation on the matter.
Firms were happy to see the government was finally scrapping what the budget said was “one of the most common methods used to initiate pension fraud”, but highlighted the need to stay vigilant against fraudsters.
In a statement, financial services company AJ Bell said: “Progress in banning pensions cold-calling has frankly been glacial and there is little doubt many more people have been targeted by scammers as policymakers have prevaricated. Nevertheless it is positive the ban now appears close to becoming a reality, with the government aiming for as wide a scope as possible.
“The ban will only be effective if the Information Commissioner’s Office (ICO) bares its teeth and comes down hard on the crooks who will inevitably seek to flout the rules. It is also critical that the government doesn’t see this as the end. While a ban on cold-calling will help in the fight against pension fraud, scammers’ tactics are evolving, and policymakers must continue to monitor the market and ensure savers’ hard-earned retirement funds are protected.”
Claire Trott, head of pensions strategy at St. James’s Place (SJP) Group, said: “It’s good to finally see the ban on pensions cold-calling come to fruition with the final regulations being laid before parliament in autumn this year and coming into force once approved. This has been a long time coming and although it won’t stop all pensions scams, anything that can be done to stop even one person losing their hard-earned pension is worthwhile. We all need to remain vigilant to changing scams, and pension schemes themselves need to be at the forefront and protect their members as best they can.”
Ian Browne, pension expert for Quilter, said: “The consultation response on the cold-calling ban is full of sensible commitments, including raising awareness and having the ICO publish guidance. It is vital the government keeps to these promises and the timeline. Of note, the government used the consultation response to point out the Financial Conduct Authority (FCA) do not want a ban on investment in unregulated investments. The government highlighted that the FCA will rely on financial advice and Sipp operator due diligence to safeguard investors.”
Rise in personal and lifetime allowances
Hammond also announced he will increase the personal allowance to £12,500 and the higher rate threshold to £50,000 from 2019.
Prudential’s Cameron added: “The bringing forward of the £12,500 personal allowance and £50,000 higher rate threshold will be welcome to those on lower incomes, but we mustn’t forget that increasing personal allowances are bad news for higher earners. Those with incomes over £100,000 will see an effective tax rate of 60% on £25,000 of their incomes.”
The chancellor also confirmed the lifetime allowance would rise to £1.055m on 6 April 2019, as International Adviser has previously reported.
SJP’s Trott added: “The confirmation of the rise of the lifetime allowance is welcomed because, yet again, there was a fear this could be cut to help raise the tax taken on pensions at retirement. Again, had this been changed, more trust in pensions would have been lost at a time when company pension scheme members are on the rise because of the success of auto-enrolment.”
