What a difference a positive forecast can make. All of us in business know about the commercial imperative of a business plan. You need a goal if you hope to achieve anything meaningful. Your business plan is your articulation of at least your one-year and possibly your three-to five-year goals. We all know that the further out the projection, the less reliable it is going to be. After all, things change, and often pretty radically.
Anyway, my point is the Chancellor was able to plot the next phase of his fiscal agenda based on an unexpectedly positive Office for Budget Responsibility forecast in relation to tax receipts and interest rates, and this was reflected in his Autumn Statement and Spending Review. The OBR positivity was just as well given the fiscal negativity imposed on the Chancellor in the shape of the tax credit “climb down” and the necessary increase to the defence budget.
But enough of the macro stuff. What about the proposals that may not have caught the eye of the press or the public at large but will be of interest and relevance to financial planners and the financial planning process?
In the pensions world, the Government confirmed it had received several hundred responses to the tax relief consultation and will publish its findings at the Budget on 16 March. Other announcements included the following:
Basic state pension
This will be increased under the triple lock guarantee to £119.30 a week from April. The maximum single tier state pension that will apply for those of state pension age on or after 6 April 2016 will be £155.65 a week, slightly more than the previously announced £151 a week.
Pension contribution increases were originally scheduled for 1 October 2017, on which date the contributions were set to increase for employers to a minimum of 2 per cent and 3 per cent for employees, and 1 October 2018, on which date the contributions were set to increase to 3 per cent for employers and 5 per cent for employees. However, the effective dates of the increases have now been delayed by six months so that they are aligned with the tax year. The October 2017 increases will take effect from April 2018 and the October 2018 increases will take effect from April 2019.
Local Government Pension Scheme
The Government will publish guidance for pooling scheme assets into up to six British wealth funds containing at least £25bn in each fund. The intention is to reduce costs, maintain overall investment performance and match the infrastructure investment levels of the top global pension funds.
Although there have not been any changes made to salary sacrifice arrangements, they are clearly on the Government’s radar. It is gathering evidence on such arrangements to consider whether action is required. This could be included within any changes made to the tax relief system.
And do not forget, regardless of any changes that might emerge in relation to salary sacrifice, there is a different anti-avoidance provision for any salary sacrifice made on or after 9 July 2015 to be added back in determining what an individual’s “threshold income” is for the purpose of working out whether tapering of the annual allowance will be implemented.
Next week, I will be looking at the rest of the changes put forward in the Autumn Statement, as well as providing a round-up of proposals that had already been announced to be implemented in the coming tax year.
Tony Wickenden is joint managing director at Technical Connection