What the Chancellor could announce on Wednesday
Philip Hammond will deliver his first Autumn Statement speech on Wednesday. Here, Tom Selby of pension provider AJ Bell, looks at what major announcements savers and investors should look out for.
Lifetime ISA rule changes
“It feels like the Lifetime ISA is too far down the road for major changes but it has some vocal critics, including two former pensions ministers so it will be worth keeping an eye on any surprise changes to the rules,” said Selby.
“The exit charge seems overly punitive given that exit fees have been capped at 1% for pensions and the maximum age requirement of 40 restricts the product from some core groups that could benefit, such as the self-employed.”
Cuts to pension allowances
“The increasing cost of pension tax relief will not have gone unnoticed by the new Chancellor. While it is unlikely he will tear up the existing system at a time of such constitutional turmoil for the UK, there is a chance that we could see some further tweaks to the existing pensions allowances to raise cash for the Treasury,” said Selby.
“All eyes will be on whether he slips in any further reductions to the annual or lifetime allowances. This would be disappointing as it would hit middle income savers and further undermine pension savings in the UK at a time when he should be doing exactly the opposite.”
Headline-grabbing tax giveaways
“This may be wishful thinking given the state of the government’s finances but the new chancellor may want to stamp his mark with a headline grabbing move. A reduction in VAT is a move to look out for which would potentially help offset rising inflation and keep people spending. Accelerating the planned increases in the personal allowance is also an option,” said Selby.
“Alternatively he could look at savings allowances. The ISA allowance is already due to increase to £20,000 in 2017/18, but the chancellor could, with the 2020 general election in mind, be tempted to further raise ISA limits to show the government remains on the side of savers. The Treasury also introduced a ‘savings allowance’ this year and increasing that allowance may be tempting if Hammond wants to demonstrate this government is looking after all savers in the UK.”
End of state pension triple-lock
“The state pension triple-lock, which guarantees an annual increase in line with the highest of earnings, prices and 2.5%, appears doomed in the long-term after the Work & Pensions Committee recommended scrapping the policy. One potential get-out would be to expand the independent Cridland Review of the state pension age to include an evaluation of annual increases. This could take some of the electoral sting out of a hugely unpopular policy move.”