Tag Archives: pensions

UK Budget 2015 – kitchens, vans and Eton mess

The Chancellor, George Osborne, delivered the final coalition Budget speech before the election in May with a few surprises, some omissions and both sides of the House of Commons commenting on personal aspects of the leaders and parties they represent. Milibands two kitchens and two fridges being controlled by an app, the colour of vans, white or labour pink as they cross the Severn bridge and Cameron’s Eton scribes of the party manifesto. The speech however was dominated by statistics on growth, inflation, deficits and borrowing and politically charged.

In terms of business there appears to be an effort to ensure stability and progress to support the economic recovery and the initial reaction of markets seemed to concur as the FTSE 100 rose by over 100 points on the day. Major announcements related to diverted profits tax, an increase in the bank levy, assistance to charities, reductions in petroleum revenue tax, regional stimulation, infrastructure projects, boosting science and technology investment and changes in employers national insurance for younger workers and apprentices. Interestingly however a number of key issues were recognised but deferred until after the election including, business rates and changes to annual investments allowances. In addition public sector expenditure was almost ignored and of course no talk of the cuts in benefits and tax credits implemented already plus other tax rises, something Ed Milliband was keen to expound in his response to the Chancellors speech.

For the general populous the news on pensions was expected with flexibility on annuities for both new and existing pensioners, but with a further restriction on the lifetime allowance to £1m. Good news though for most taxpayers with the introduction of an allowance on savings interest, for basic rate taxpayers at £1,000 and those on higher rate at £500. Another piece of good news on form filling as the annual HMRC tax return is to be abolished and replaced with a “digital tax accounts”, however the robustness of data collection systems and accuracy of the information will be challenging for HMRC. Personal allowances are set to rise but only by £200 in 2016/17 and another £200 the following year, together with small increases in the higher rate tax threshold. There is more flexibility with existing ISA products but a new Help to Buy ISA is being introduced for first time house buyers, whereby for every £100 saved an additional amount of £25 will be funded by the government. Minor tinkering with duties, including the freezing of petrol duty again, which is in fact not a saving as the current duty still has to be paid. Cutting duty would reflect a true saving as in the reductions in beer, cider and whisky cited in the budget speech.

All the above and more would, in past years, have been debated ad nauseam however with an election in a few weeks it is policy rhetoric that will be the focus of all parties trying to engage the electorate. Apart from the general populous we wait and see what the young and silver voters make of the political marketers efforts.

UK Comprehensive Spending Review – Pensions & Private v Public Sectors

It has been just over a week since the UK comprehensive spending review, (CSR)), which was keenly awaited but with no surprises on the whole, except there were copious figures quoted and a time frame of 2014 / 15 to turn the country around. The upshot was work longer, pay more taxes, and suffer reductions in benefits and public services.

There was however a “double whammy” for men in respect of pensions with an earlier rise in the retirement age and the potential for a move by annuity providers to remove the differential in providing higher annuity rates to males who have the same sized “pension pot”, as females on the basis that men are likely to die sooner. This is a result of a European Court of Justice opinion that “insurance companies may not charge men and women different rates for products”. Once this opinion is ratified in EU law it could have significant implications for life insurance premiums, transfer values and member options.

The private sector over the last eighteen months has suffered the full impact of the economic downturn, recession and low growth “recovery”, but things are getting worse with the cuts announced in the CSR and a view that the private sector will have to absorb the fallout in people and cuts in services in the public sector. In addition, public sector workers will have to increase their contributions and possibly move from a final salary to average salary scheme………..but this is a half measure. The private sector has already, over a number of years, moved away from final salary to money purchase schemes and increased contributions have followed for employees. Why can’t the public sector make the change? More importantly, there should be legislation that does not allow any government to utilise public pension funds in other areas of public sector spending, thus protecting public sector workers.