As George Osborne said, this Budget was about “paying for the past and planning for the future”. Perhaps as advisers we need to now focus on both planning and paying for the future.
The changes are such that careful planning and diligent use of allowances will be essential if individuals are to avoid losing out in terms of allowances and restricting their room for manoeuvre in the coming years.
The fact that the pension contribution rules are to alter is good news but I can only hope that the Government takes a long look at the impact that anti-forestalling rules had on people made redundant when redundancy payments triggered levels of taxation that were never anticipated.
Much of the impact of this Budget will only be seen when ex-Labour Work and Pensions Secretary John Hutton reports on public sector pensions – an interesting move to use a Labour peer to tackle this issue.
Now compulsory annuitisation has gone and those who would have been caught will see their limit moved from age 75 to age 77. I should point out that the selection of age 77 is due to when the requirement to purchase an annuity disappears and not any homage to 1960s cop show 77 Sunset Strip.
This change will have an interesting effect on the annuity market. Are providers to be left with small funds and those in less than perfect health? What will this do to rates and will those in the drawdown space now look back to mixes of risk and guarantees? The need to review plans in retirement provides income opportunities for advisers that fit the RDR reforms perfectly.
The need to use annual allow-ances enables the kind of relationship that all adviser firms need – making limits, etc, simple does not mean that life is also kept simple and that is where the professional adviser gains through these changes.