Our
panel of experts will be tweeting and commenting throughout the Budget on 19th
March from @Brewin_Guy
Wealth manager Brewin Dolphin unveils its
budget predictions
A key focus of this year’s budget is
likely to be pensions and the increasing demand for reform in the annuity
market. Nick Fitzgerald, head of financial planning, said, “We are always busy
with pensions in the approach to the end of the financial year, but this year
we have not noticed a discernible increase above the usual, of clients rushing
to top up their pension pots.
“The world of pensions is increasingly
less certain with a loss of trust in the stability of the regime. Over recent
years we have seen a constant nibbling away at the incentives to save; reducing
lifetime allowances; a fear of means testing for the state pension; investments
in pension funds no longer receiving dividend tax credits – which were a huge
incentive in the past; and now more and more pension savers are paying higher
rate tax in retirement. Altogether, these changes are making ISAs a more
attractive long term savings vehicle.
“There is a growing fear that pension savings
are an easy target for stealth taxes. A commitment from the government that
pension reliefs will not be tinkered with for the lifetime of the next
Parliament would help restore trust, especially in the face of Labour’s
intention to restrict higher rate tax relief - costing pension savers an
estimated £1 billion per annum. If we are to avoid seeing further erosion of pensions,
we must regain confidence in the Government’s intentions on incentives and also
push hard for reform of the annuity market.”
Members
of the Brewin Dolphin team have given their key predictions:
PENSIONS
Richard Harwood, divisional director financial
planning - predicts:
·
Restrictions
on some of the more esoteric investments that can be held in pension schemes.
·
Possible
new limits to pension tax relief that may hit the ‘squeezed middle’
·
Announcement
that small pension pots – say <£40k – will no longer be forced to buy an
annuity
“The government has put in place measures
to further limit tax reliefs to those thought of as wealthy. It would
seem that there is political will to restrict tax reliefs so the limits may be
tightened further in future, but there is a danger that these will again hit
the ‘squeezed middle’”.
TAX
& NI
Guy
Foster, head of portfolio strategy - predicts:
·
A
clear political and economic rationale exists for raising the national minimum
wage beyond the 3% recommended by the low pay commission, although the likely
casualty of such a move might be further advances in the personal allowance.
· The
distinction between income tax and NI is now so blurred as to be meaningless
and this nettle needs to be grasped.
Guy Foster commented, “Mr Osborne has
been quite clear about the type of budget he is planning. Large scale giveaways
aren't justified by either the political or economic cycle this year.
Even as inflation falls, however, the accumulated decline in real incomes
from rising prices and stubbornly inert wages remains a hindrance to economic
prospects. A big issue therefore is what he may do for the low paid.”
VCT
& EIS
Richard Harwood, divisional director financial
planning - predicts:
·
Possible
increase in investment limits for Venture Capital Trusts and Enterprise
Investment Schemes.
·
Further
tweaking of the rules to ensure that eligible investments are not just
tax-relief schemes.
“Increasingly EISs and VCTs are providing
funding for businesses that would traditionally be the domain of banks.
But we would not be surprised if there was further tweaking of the rules on
what investments are approved in order to ensure that there is true risk within
the plans and that they are not just schemes to maximise tax reliefs.”
TAX
AVOIDANCE
Richard Harwood, divisional director financial
planning - predicts:
“This continues to be a priority and any
victory in court for HMRC is strongly publicised, so we should expect the
closure of perceived loopholes to be highlighted.”
ISAs
Rob
Burgeman, divisional director predicts
“We would welcome a commitment from the
Government to ISAs as a core long term savings vehicle for UK citizens.
Speculation is building that there may be changes here and the uncertainty
is most unwelcome and destabilising at a time when every encouragement should
be given to those seeking to ensure their long term financial security. Any
restrictions on ISA savings will drive the spare savings flow into the already
overheated property market.”
CAPITAL
GAINS TAX REFORM
Rob
Burgeman, divisional director predicts:
“Greater simplification is required over
CGT, especially as savers are now being taxed on inflation since the indexation
of book costs was removed. How long before we will see fair differentiation in
the taxation of short term speculation and long term investment?”
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