The air is thick with speculation as we approach the final straight towards the autumn statement. Everything from ISA to pension changes is being widely debated, and this could be a real opportunity for people’s savings and investments.
One suggestion with apparent support from the treasury is letting people hold more than one of the same sort of ISA in each tax year. We think this is a sensible move, making it much easier to open, top up, and transfer ISAs. It would also massively lower the risk of someone making a mistake.
For some of the other ideas floating around, there’s a reasonable chance they could be brought into a consultation on wider ISA reform. There’s potential here to include everything from long-term asset funds to fractional shares.
We also have to think about the fact that consultation takes time, and there’s no guarantee the political landscape will be the same when it’s over. There’s always the chance none of the recommendations are adopted.
This article isn’t personal advice. Pension, ISA, and tax rules can change, and any benefits depend on your circumstances. If you’re not sure what’s right for your circumstances, ask for financial advice.
What are the hopes for tax cuts?
On balance, the likelihood of tax cuts in the statement appears to have risen very slightly.
Cuts were expected to be postponed to the spring. But, the Office for Budget Responsibility (OBR) has announced more ‘fiscal headroom’ at the moment, with a warning it might have disappeared by the spring. So, it might be now or never for tax cuts.
However, the government will be keen not to fan the flames of inflation. If Chancellor Jeremy Hunt does pull the trigger on tax cuts, it’s the less inflationary inheritance tax and stamp duty thought to be in the frame, and not income tax.
Changes we’d like to see
By the sounds of things, some incredibly positive potential changes have been ruled out. Things like cutting the Lifetime ISA (LISA) withdrawal penalty and raising the price limit of a property you can buy with a LISA appear to have been rejected.
However, there’s still a chance for the chancellor to bring in ISA and pension tweaks that would make a big difference.
It makes perfect sense in our view to increase the overall ISA allowance given runaway inflation in the last two years. Last changed way back in 2017, the ISA allowance hasn’t risen at all from the £20,000 limit.
We’d like to see him make the LISA a more attractive vehicle for retirement saving for the self-employed. So, we think the age for opening and paying into a LISA should be increased to 55. This could help 680,000 households with a self-employed worker who pays the basic rate of tax.
We’d also like to see the introduction of some kind of lifetime pension.
Multiple pension pots, a lack of support with retirement income decisions and complex regulatory requirements all get in the way of people navigating the system.
A lifetime pension would mean people could put employer contributions into their pension pot of choice, so they’re less likely to lose track when changing jobs.
There’s also an opportunity to announce next stage consultations on the financial advice/guidance boundary.
There have been some sensible proposals around the amount of help financial firms should be able to give people without it constituting advice. We’d like to see that accelerate to a concrete conclusion.
Could the triple-lock change?
Red-hot wage inflation kicked off more speculation about potential tinkering with the triple lock. It also raises the question of the rising cost of pensions, and whether the government will increase the State Pension age to make it more affordable.
None of this offers pensioners the certainty they need over when they’ll receive the State Pension, and how it will rise in future. So, we think the time has come for a review of the State Pension and the triple lock.
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