23 October 2019
If you’re covering the upcoming budget, please see the following comment from Quilter spokespeople outlining their key policy asks.
Jane Goodland, corporate affairs director:
“Brexit has become a saga the public and politicians alike have wished would have ended several iterations ago. As the epic continues key government personal finance, tax and pension policies have been left in a state of paralysis.
“In fact there was a question mark over whether we’d even have a budget this year, however, the Chancellor Sajid Javid has promised that he will carry the iconic red briefcase into parliament to deliver his package of reforms.
“With an election likely to be imminent the new Chancellor will want to tempt voters on side and will be looking at easy giveaways.
“To really galvanise public support Javid should be looking closely at the personal financial policies that have been left neglected over the past number of years. But whatever he promises he needs to deliver. Policies like social care and pensions have been side lined for too long and decisions must be made for the long term. U-turns and overhauls are not only irresponsible they are unfair and have the capacity to create unnecessary strain on the hardworking UK public.
Key personal finance policies left unresolved include:
- Tackling pensions allowance issues and pritorise the taper which is causing the NHS to crumble
- Reforming social care funding to make the system clear and people know what they can get from the state
- Removing elements of complexity from the inheritance tax system
- Simplify the ISA regime
- Introducing financial education into primary schools to ensure generations of tomorrow are prepared
Ask 1: Tackle pensions allowance issues and pritorise the taper which is causing the NHS to crumble, says Ian Browne, pensions expert:
“The Chancellor has proclaimed that he wants his budget to promote an Infrastructure Revolution. While at first glance pensions don’t seem to directly align to that vision, but that is far from the case. He needs to address these pension tax allowance issues to allow hard working people the opportunity to properly invest for their retirement. Allow people to put more money into their pension and let these pensions help invest in UK economic growth.
“The Chancellor should also not ignore the power of pensions to woo voters in the inevitable upcoming election. The introduction of the ill-conceived annual allowance taper has had a disastrous impact and has the capacity to bring several public services to a grinding halt.
“Thousands of doctors, civil servants, judges, armed forces personnel and other public sector workers have faced tax penalties for breaching the annual allowance because of the way their schemes and contributions rates are structured.
“The result is that employers are having to implement a complex workaround, and government departments from the NHS to the MoD are having to devise alternative strategies to alleviate staffing pressures as senior employees consider reducing hours or retiring to avoid the punitive tax charge.
“A far simpler response is to scrap the taper.
“The taper isn’t the only allowance that is causing the public unnecessary grief. There is an often hidden risk to over-55’s in the form of the Money Purchase Annual Allowance (MPAA). The allowance is supposed to prevent double-dipping on valuable pension tax relief by repeatedly taking money out and then putting it back in. The premise makes sense but Javid’s predecessor cut the allowance from £10k to £4k meaning it captures an unnecessary number of people within its net.
“The allowance is particularly problematic for the increasing number of people who are taking a phased approach to their retirement, which is only possible thanks to pension freedoms. This unnecessarily punitive allowance desperately needs a rethink.
“Pension taxation as a whole is due a review, but if previous policy making is anything to go by this will take years before we see change and the situation with the taper is at crisis level so should be dealt with now and the MPAA should not be far behind.”
Ask 2: Reform social care funding to make the system clear and people know what they can get from the state, says Rachael Griffin, tax and financial planning expert:
“At this point any mention of the social care green paper is met with a sigh and rolled eyes. It’s been years in the making and all we’ve had are false starts, u-turns, delays and ultimately nothing has moved forward.
“In the Queen’s Speech the government promised concrete reform and they must deliver it. We need proposals that have been costed and thought through.
“There are a number of key pillars that are needed to support a social care system no matter what structure is in place, but it all starts with simplicity and awareness to get the public on board. Inevitably we are going to end up with a structure where the state commits to pay for some and the public will have to self-fund the rest. Financial advisers can help people navigate how much they need to set aside for potential costs and the best products to place that money in but first we need a clear understanding of how much will sit on the public’s shoulders.”
Ask 3: Remove elements of complexity from the inheritance tax system, Rachael adds:
“There have been recent murmurings the government is looking to scrap inheritance tax. This would be a clear crowd pleaser, however, a complete eradication is unlikely at this point in time. The tax brings in £5.4bn per year to the government and with finances looking tight that’s a big chunk of change to do without particularly when other giveaways are on the cards.
“However, the Chancellor can still win some points from inheritance tax reform through a straightforward simplification exercise. The Office for Tax Simplification was recently tasked with just that and in two reports they outlined some of the arcane intricacies that lurk in the system and offer a number of options for reform.
“Among other things the paper recommends updating the gifting allowance to align it to inflation; removing capital gains tax uplift on death; extending spousal tax rules to cohabiting partners; and calls for a simplification of the Residence Nil Rate Band. These are some further sensible measures which could resolve some simple flaws.”
Ask 4: Simplify the ISA regime, Rachael comments:
“A simple concept at its inception, the individual savings account has been a victim of its own success and become a muddled landscape. There are too many versions, each with their own unique set of rules, leaving savers confused as where is the best place for their money.
“The worst of these is the Lifetime ISA – a product that tries to combine saving a house with saving for a pension in one confused concoction.
“Over the past number of months there have been calls on to the government to scrap the entire regime and replace it with an ‘Everything Isa’. This will need careful thought to ensure savers aren’t disadvantage, but the principle of one set of guidelines for savers to get to grips with has undeniable merit.”
Ask 5: Introduce financial education into primary schools to ensure generations of tomorrow are prepared, says Jane Goodland, corporate affairs director:
“Easily accessible debt, contactless payments and a general lack of knowledge of finances has led to a catastrophic combination of financial feebleness within the UK.
“The best way to combat this is to give the upcoming generations the tools to succeed through financial education.
“KickStart Money has been trialling financial education in primary schools by bringing it to over 3,000 pupils across the UK. A new evaluation of the programme, which is delivered by the charity MyBnk, found 2 out of 3 primary aged children were actively working towards a savings goal after receiving lessons - nearly double the national average. 77% were now also able to delay spending gratification.
“It is proven financial education in primary schools works so the Government need to act now to protect the futures of the 4.73 million primary aged children across the UK.”