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Budget: what's Hammond planning for your cash?

The second Budget of the year is upon us and chancellor Philip Hammond has tough books to balance.

 
Budget: what's Hammond planning for your cash?

The Autumn Statement is no more but that doesn’t mean investors and savers won’t be treated to a second Budget this year, and once again the chancellor has his eye on pensions.

Chancellor Philip Hammond will deliver the Budget tomorrow and fiscal and spending pressures combined with revenue shortfalls, and the need to head off the Brexit threat mean it won’t be an easy one.

So how could the Budget impact you?

Pensions

Every Budget sees pension tax relief up for the chop, and every time it’s saved just in time as no chancellor dares to strip pension savers of this generous boost to their retirement pot. The rumour this time round is that a cut in tax relief will be used to fund a national insurance contribution (NIC) reduction for young people.

The latest HM Revenue & Customs (HMRC) figures show the cost of pension tax relief rose by around £3 billion in the last year. Despite criticism that the wealthiest benefit most from tax relief, as savers receive relief at their highest income tax rate, meaning the more you earn the more relief you get, it is unlikely that Hammond will do anything too radical.

Former pensions minister and Royal London director of policy Steve Webb said Hammond was more likely to cut the £40,000 annual allowance for pension contributions again.

‘With contribution limits on ISAs having been raised substantially in recent years to £20,000, the chancellor will feel he can cut the annual allowance with very limited political fallout,’ he said.

He predicted ‘one or more cuts to the annual allowance, perhaps to £35,000 and then to £30,000’.

The lifetime allowance, which was cut to £1 million last year, could also face a trim to £900,000, added Webb.

‘This is an area where chancellors have repeatedly sought revenue, there must be a chance that we will see further cuts to the lifetime allowance,’ he said.

One area that is often rumoured for a cut, but Webb believes will be spared this Budget, is the 25% tax-free lump sum that allows retirees to take a quarter of their pension pot tax-free.

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4 comments so far. Why not have your say?

Mr Grumpy

Nov 21, 2017 at 17:09

"Limited political fallout" by cutting the annual ISA allowance ?!?

Who does he think he's kidding? Savers have been hammered for years, and to

clobber the only savings benefit available to them would be political suicide.

FFS,

report this

dab

Nov 21, 2017 at 20:02

The LTA has already been cut-back recently and linked to RPI. I can’t imagine he would mess with that so soon after these other cuts. The whole idea of limiting the size of a pension fund, which individuals cannot directly control, rather than the amount that they can pay into it is flawed in any case.

If the 25% tax-free amount is cut this will further destroy confidence in pension saving as it would take away a long established benefit. Pension savers need long term certainty in what they are getting in return for tieing up their money for decades.

A review of the paltry £3,600 limit for tax relief on pension contributions by non-taxpayers (e.g. careers) is long overdue. Something like £10,000 would help in this respect.

Perhaps extending LISAs for older savers is another sensible option. These effectively give tax relief at basic rate on contributions AND allow benefits to be taken tax-free, providing this is for a first home or for retirement.

PS Hi Mr Grumpy - I think the reference to cutting the annual allowance was in relation to pensions, not ISAs.

report this

Tyrion Lannister

Nov 21, 2017 at 23:02

Mr Grumpy, read the article again.

The comment was that he could cut the annual pension allowance without much political fallout, not the ISA allowance.

This is probably true, although any other meddling with pensions would make a lot people, me included, angry.

The Tories, once the champion of the hard working middle class, have been hammering these vey people all too much in recent years. And they’ll continue to do so while so many blindly vote for them.

I for one have had enough and until the Tories radically change their tune, they’ve no chance of getting my vote.

report this

Hugh M

Nov 22, 2017 at 05:39

Tyrion, so who will you vote for? Jeremy?

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