PENSIONSANDSAVINGS.COM

• Chancellor plays it safe – sensible reforms to boost growth and some nice surprises.
  
• Glad to see no big changes on pensions.
  
• Increase in personal tax threshold to £12,500 will boost auto-enrolment in April 2019 when worker contributions double.
  
• But yet another missed opportunity to find money for social care.
  

So there we have it.  The last Budget before Brexit, cleverly crafted to ensure measures will please as many groups as possible who might have been tempted to vote it down. Great giveaways on personal taxation, more money for Universal Credit, help for the high street, big investment in infrastructure and sensible time-limited encouragement of spending by businesses on investment plans. No big news on pensions and a boost for auto-enrolment next year as personal tax thresholds will increase to minimise impact of contribution rises on opt-out rates.

A sigh of relief – no news about pensions:  After so much speculation that the Chancellor would look to raise money by reducing the generosity of pension tax relief, many will be relieved to see no changes announced. There have been so many reforms in recent years that a period of stability is helpful, especially as the auto-enrolment programme will be completed in April 2019.

Increase in personal tax threshold to £12,500 in April 2019 should protect auto-enrolment as contributions will double next year: The increase in the personal tax allowance next April, to £12,500, which is being brought forward by one year, will help alleviate any pressure on opt-out rates that could have resulted from the requirement to double member contributions in April 2019. Worker contributions are set to rise from 2% to 4% of relevant earnings, but the increase in personal tax allowance means the impact on take-home pay will be much less.

Consultations on charges and pensions dashboards: The Budget has announced there will be new consultations later in the year on disclosure of pension charges and also on the introduction of pensions dashboards. Interesting to see that the consultation will look at more than one dashboard and it will link to the State Pension. However, we are a long, long way from any actual dashboard being legislated for or rolled out.

Budget generally exceeded expectations: It seems pretty obvious that no sensible Chancellor would wish to rock the boat at this juncture in our national development. He has announced that austerity is coming to an end. The UK has met both his fiscal rules three years early and there is therefore headroom to boost some spending. He has certainly exceeded many people’s expectations with support for different parts of the population and the economy ahead of Brexit.

Help for many different groups: There is help for retailers, help for more first-time buyers, reforms to improve and cut costs for small firms of the apprenticeship system, more money for the NHS (especially mental health) and even freezing duties on spirits, cider, beer – and fuel. He has offered help to the struggling high street, as more and more retail businesses lose out to on-line competition which has far fewer overheads and pays significantly less tax and announced a digital platform tax that will please many who are concerned about the low level of tax paid by digital firms.

But no help to resolve the injustice of low earners paying 25% extra for their pensions: Although it is welcome, the rise in the personal tax threshold to £12,500 does have a downside. Yes, it should help reduce opt-out rates for auto-enrolment, but it will bring more people into the zone in which they have to pay 25% extra for their workplace pension. Anyone who earns below the personal tax threshold is entitled to basic rate tax relief – equivalent to a 25% bonus on their pension – but they cannot get that money if their employer uses a Net Pay scheme or salary sacrifice. This injustice affects low earners, mostly women and needs to be urgently remedied.

Also no new measures for long-term care:  It is disappointing that there are no new measures to encourage or incentivise people to put money aside for funding long-term care needs. Just promising more money is welcome, but nowhere near enough to address this crisis. We are still waiting for the promised Green Paper ‘shortly’!  Meanwhile, families are not prepared for care, nor is the Government, yet this looming crisis could eat up the resources of many families who might have been able to put some funds away if they had known about it. It could also break the NHS.

Implied threat to Brexiteers to abandon thoughts of No Deal Brexit: With the announcement of politically popular measures, the Chancellor has also held out the interesting threat that these could be abandoned if there is a No Deal Brexit. This throws down a challenge to Tory extreme Brexiteers that if they do not accept a Brexit deal, but push us towards the cliff-edge next March, these popular policies may be undone. But, assuming there is a reasonable deal, the Chancellor’s plans are to increase spending on investment and infrastructure, to continue cutting personal taxation and to boost resources for the NHS, especially mental health.

The aim of this Budget was to please as many people as possible, regain political momentum as a Government with policies to help the low paid, keep taxes low and boost growth. It probably achieved its aims. 

ENDS