The Chancellor Phillip Hammond has delivered his first Autumn statement as Chancellor of the Exchequer. Amidst rumours of pension tax relief reforms, the lifetime ISA being repealed & ‘the triple lock’ policy for pensions being removed, the resultant budget was less entertaining than Honey G’s performances on X-Factor – we know, it’s a hard feat to achieve.
Nevertheless, some important announces were made, which at Moorland Mayfair, we will build in to our everyday business model, and take in to consideration what it means for your money.
An interesting announcement which came from the statement was centred around the Money Purchase Annual Allowance (MPAA). This is the annual amount individuals can contribute to defined contribution pensions after having previously accessed a pension flexibly. The current allowance stands at £10,000 however the planned amendment will see this figure slashed to a mere £4,000.
The cut will come in to force in April 2017, however the government informed it would consult on further detail on the plans. The Chancellor said the decision was taken “to prevent inappropriate double tax relief.”
But what does this mean for those aiming to merge working later in life with continued pension savings?
There is no hiding from the fact this decision means that it will be far tougher to achieve true flexibility in retirement. The idea is they will have less money to play with to recycle it however this is only likely to affect a small number of people. In fact, the consultation document points out that only 3 percent of individuals aged over 55 make pension contributions of more than £4,000 a year!
Elsewhere a new 3-year savings bond will be launched through National Savings and Investments, with an expected interest rate at about 2.2%. The bond will be open to those aged 16 and over, subject to a minimum initial investment limit of £100 and a maximum investment limit of £3,000 per annum. Details are due to be announced when the bond is launched in the spring statement.
So how does this compare to what’s available on the current market? Well, the equivalent best-buy-3-year bond on the market currently pays interest of 1.62% representing an increase of 0.58%. The Chancellor said he expected around two million people to benefit from this adjustment.
Continuing the positive note there was some good news for the business people of the UK, after the much-anticipated decrease in corporation tax was announced by the chancellor. Corporation tax will fall to 17pc, making it the lowest rate of corporation tax in the G20. No doubt this will put a smile on the faces of many business owners up and down the country with reduced tax bills, freeing up potential capital to re-invest.
This was the Chancellor Phillip Hammond’s first Autumn statement as Chancellor of the Exchequer which also proved to be his last after announcing it would be scraped and replaced by a Spring statement. It is clear he is keen to continue the upward trend in the growth of the economy, after addressing his concern around long term growth as being “more urgent than ever”. The Chancellor said he promised to build an “economy for everyone” with and expected growth to be 1.7pc in 2018, 2.1pc in 2019 and 2020, and 2pc in 2021. Only time will tell.
Raffaele Castaldo DipFA
24 November 2016