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Nick Fitzgerald of Brewin Dolphin

Expert opinion: The budget – will they fudge it?

As the March 19 budget looms, the fickle nature of the pensions industry will likely be high on the agenda – with increasing demand for reform in the annuity market.

“Over recent years we have seen a constant nibbling away at the incentives to save,” says Brewin Dolphin’s head of financial planning, Nick Fitzgerald.

“A commitment from the government that pension reliefs will not be tinkered with for the lifetime of the next Parliament would help restore trust.”

That wish is endorsed by many facing retirement, but it’s in no way assured. Unperturbed, our crack team of seers are happy to voice predictions and air their rationale in key areas:

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 rise in the national minimum wage beyond the 3% recommended by the low pay commission – which may hamper further advances in the personal allowance.
The distinction between income tax and NI to be made clearer.

“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.”

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:

The closure of perceived tax avoidance loopholes to be highlighted.

“This continues to be a priority and any victory in court for HMRC is strongly publicised.”

Rob Burgeman, divisional director – predicts:

A potential 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 to emerge over CGT.

“As savers are now being taxed on inflation since the indexation of book costs was removed, how long will it be before we see fair differentiation in the taxation of short-term speculation and long-term investment?”

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