Today is Budget day and quite possibly by the time you read this the Chancellor will have presented the first Labour Budget for 14 years to the House of Commons.
We will of course report back to you next week on what the Budget contained and offer any insights we have on how it might affect you in terms of pensions, investment, bequeathing your estate or indeed anything else.
Speculation has been rife in advance of the Budget as the Chancellor Rachel Reeves seeks to plug a ‘£40bilion black hole’ (up from an initially quoted £20bn, but that’s inflation for you!)
With promises not to increase Income Tax, VAT or National Insurance (at least not for employees, for employers may be another matter), the Chancellor does not have a huge amount of wiggle room.
However the grapevine continues to suggest there may be changes to tax relief on pensions, the tax free lump sum accessible of pensions at age 55, possibly higher Capital Gains Tax and business relief, perhaps nasty surprises on Inheritance Tax and disqualification of AIM shares.
As with most Independent Financial Advisers (IFAs) across the country, we have seen an increase in enquiries from clients and we have done our best to advise them on the options available.
In fact, a recent survey from Opinium has revealed that 87% of IFA clients were concerned about the potential announcements, with 47% ‘significantly uneasy’.
In an online survey among 200 advisers, clients’ top fears included the possible scrapping of the 25% tax-free lump sum (70% of those surveyed rated this as their biggest worry), changes to Capital Gains Tax rates (44%) or Inheritance Tax (47%) and possible pension reforms (54%).
The data said this had seen a 50% increase in requests for advice as people tried to prepare for any changes that might affect them.
A survey conducted by AJ Bell has also produced similar results, with 99% of advisers saying they had seen an increase in enquiries. We can relate! But we would also rather people spoke to us than suffer anxiety or indeed make knee jerk decisions which will do them no favours.
For example, Citywire reports thousands of people have cashed in their tax free lump sum amid fears they may lose out, which ultimately may not be good for them or for the pension system.
Any cuts to the £268,275 allowance would be very complex – it may well impact defined benefit schemes, plus what about those with large pots already accumulated? Changes may be required to pension scheme contracts and trust deeds. Since members’ benefits cannot be altered retrospectively, this could lead to legal action.
The rumour mill – fed by the media – has been working overtime but we would strongly advise people NOT to make such life-changing financial decisions based on rumour.
We will all know the results of the Budget within hours and we will do our best to shed some light on what it all means to you next week, but in the meantime, we suggest you sit tight and do not make any hasty decisions without consulting us (or your own adviser) first.
