There is nothing like the threat of losing a tax-break to get people to value it. The Annual Allowance is under threat, so the Money Purchase Allowance, there are some still worried about higher rate tax-relief on contributions.
In my little world, raising money for AgeWage’s SEIS has seen a flurry of pre-budget interest from SEIS investors. The rules for higher rate tax payers look very generous. So I’ll be donning my bicycle clips and collecting applications from distressed millionaires this morning!
The behavioural aspects of budgets are always the same. A long build up with the Treasury planting rumours in the hope that they can test the waters of public opinion, the build up in the morning as the tension builds to a climax in the morning before. Then there’s the speech in which high level platitudes are delivered – insults returned. Finally there is the real hard work when experts read through the detail and opine on the consequences in budget newsletters, many of which will be out the same evening as the speech.
If you think about it, it is one of those little rituals of British public life that allows everyone – for a few hours – to engage about money – principally – their money.
Gone of course are the days of a penny on the pint and a shilling on a pack of fags. Duties are dwarfed by the impact of Brexit. We are now trying to balance the books against a world could be upon us in less than six months. We are living in a world of anticipation, fear and exhilaration. No one will get the Brexit that they want!
The budget can only position the ship to sail into the eye of the storm in hope that it will have re-emerged this time next year in reasonable shape. I think this calls for the nautical cliché, “battening down the hatches”.
Today’s budget is about tomorrow’s Brexit, but it must also be about our financial futures whatever our relationship with Europe.
It would be a sad waste if the Chancellor did nothing on pensions. I mean that the Chancellor ignored the “net-pay” pensions problem. I mean too that the Chancellor did not return to the tax- inequalities of the pension system which is fast becoming a “wrapper for the wealthy”.
Aligning the tax-incentives of pensions to the public good is long-overdue. Right now they are aligned to the good of the wealth management industry which is showing little signs of reciprocity. The wealthy are not giving back to the state, choosing to invest in ways that suit the wealthy not the ordinary person. Pensions are no longer a means of keeping middle England out of dependency on the public purse but a leg up for the aspirational mass-affluent and a hand-out to those at the top of the wealth ladder.
It really is time the Chancellor recommitted to a root and branch reform of the taxation of pensions to make pension saving a mass market activity whose incentives are enjoyed by all equally.
My pre-budget apprehension is not about the curtailment of allowances to the wealthy, but about the less- wealthy’ s incentive predicament being ignored again.
My worry is that auto-enrolment will in time be discredited by our failure to deal with the “net-pay anomaly”, my worry is about millions who are saving for their future who will not get pensions at all. My final apprehension is that millions who reach the stage of winding down from work in the next decade will find the process of converting pot to pension just too hard.
“Battening down the hatches” applies to the pension freedoms too
Henry when I entered the business in 1973 the top rate of income tax was 83% and investment income surcharge was a further 15% The top 1% of earners Pade 12% of the income tax burden now they pay a little over twice that. The have and have not divide may well be difficult to justify in any moral sense but if the leaders of industry in SME world cannot provide for their own family then they are reluctant to provide for staff. The tinkering (taxing) or directing of investment of pension funds by a hungry cash poor Treasury which borrows to consume hides the greater problem of productivity in the UK Reactions are predicable, look at the M&G shift of £32bn to Luxembourg as just one that we know about. Many individuals are becoming ExBrit