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Budget Heaven and Hell: six advisers share their hopes and fears

Advisers tell New Model Adviser® what they would most like to see from the chancellor this week... and what they fear most!

Heaven and hell

As we wait in Budget purgatory ahead of the chancellor's big speech later this week, New Model Adviser® asked advisers what they want, and don't want, to see come out of Philip Hammond's red briefcase. 

Read on to see how the lifetime allowance, death benefits and Boris Johnson fit into six advisers' Budget hopes.

Heaven and hell

As we wait in Budget purgatory ahead of the chancellor's big speech later this week, New Model Adviser® asked advisers what they want, and don't want, to see come out of Philip Hammond's red briefcase. 

Read on to see how the lifetime allowance, death benefits and Boris Johnson fit into six advisers' Budget hopes.

Mike Godfrey, director, Cube Financial Planning

Heaven: stamp duty cuts

Stamp duty creates so many problems and it needs to be cut. [Tiered charges reach 10% between £925,000 and £1.5 million and 12% above £1.5 million.] We have elderly clients who do not want to move property because they do not want to pay the stamp duty.

Even though it will generate revenue [the Treasury made £13 billion from stamp duty last year] that is not good for the market place. Clients might well have moved and released equity otherwise. They might find a reasonably expensive house, see the stamp duty and say: ‘Let’s leave it a couple of years’. It is suffocating.

The younger generation will also stay where they are because of the cost of stamp duty on top of legal costs. It is a strange endgame: it is now all about revenue take. People are building extensions instead of moving house, which is what they really want to do.

Mike Godfrey, director, Cube Financial Planning

Hell: u-turns and short term policies

I find it difficult when the government changes its mind on things, such as the announcement in the Spring Budget that it would raise Class 4 national insurance contributions. Within a week it had U-turned on that. It undermines the government’s credibility so much.

If it is going to make policy, it needs to be well thought through and, if it is not ready, it should not be announced. Get ready and make medium and long-term policy.

Too much short-termism drives policy. That is why we have this ridiculous situation in the pensions world that there is a tax on growth with the lifetime allowance.

Steve Buttercase, principal, Verve Investment Planning

Heaven: reverse austerity

What I would be pleased to see on Wednesday is not just a formal end to austerity but a reversal. Chancellor Philip Hammond must be prepared to borrow to invest in three key areas: housing, infrastructure, and education and skills. It is time to reject the nonsense of swingeing cuts and start boosting UK productivity.

Steve Buttercase, principal, Verve Investment Planning

Hell: more public sector pay cuts

What I do not want to see is more paralysis over public sector pay. This country is propped up by nurses, teachers, police, firefighters and their support staff. They need their recognition to be monetary.

I also do not want any huge changes to pensions or investments with the introduction of Mifid II regulations on the horizon. Ending pension higher-rate tax relief may be fair but it has consequences best sorted as part of a broader review.

Jillian Thomas, managing director, Future Life Wealth Management

Heaven: remove the lifetime allowance

If we continue with the annual allowance at £40,000, the lifetime allowance (LTA) must be removed. 

Capping both the annual allowance and LTA has been damaging. We have a savings crisis and, with state pension dates being put back, we need to encourage people to save. This medieval enforcement of rules is restricting the potential to save efficiently.

I can understand the government’s desire to cap the pensions input, but the £1 million LTA limit stops IFAs doing their job, and achieving returns in accordance with the client’s attitude to risk. 

Jillian Thomas, managing director, Future Life Wealth Management

Hell: Boris Johnson made pensions minister

The worst thing I can think of is Boris Johnson becoming pensions minister. It would certainly be entertaining, but as Boris notoriously does not read his briefs, it is entirely possible we would wake up one day and find pensions legislation even more unworkable than the current regime.

Gretchen Betts, managing director, Magenta Financial Planning

Heaven: funding for small businesses 

I would like to see measures to support small businesses ahead of Brexit. Speaking as a small business owner, with a firm based in a region of Wales that is struggling to attract new businesses and jobs, I would like to see more money and support for small-to-medium-sized businesses.

Specifically, I would like to see funding for development projects and job creation in Wales. Leaving the EU will mean funding that may have previously been available will no longer be there. For example, the £136 million Wales Business Fund, which provides business loans and equity for small and medium-sized enterprises in Wales. I would like to see the UK government filling this gap and making funding for small firms more accessible.

Gretchen Betts, managing director, Magenta Financial Planning

Hell: ISA pensions

Over and over again we see governments tinkering and tweaking products. Often these products were perfectly fine as they were easier for clients to understand.

The help-to-buy ISA and lifetime ISA are recent examples of this tinkering. My Budget hell would be some kind of pension-ISA hybrid monster.

Richard Skerritt, managing director, Skerritt Consultants

Heaven: remove lifetime allowance

The change I would most like to see would be the removal of the LTA. This would makes things far simpler.

There is a lot of complexity surrounding it at the moment, which clients do not understand, so it is easy for them to be caught out. The LTA also works in favour of defined benefit pension schemes, rather than defined contribution schemes, which seems unfair.

Richard Skerritt, managing director, Skerritt Consultants

Hell: changes to pension death benefits

I really hope the government does not make any changes to pensions death benefits in the Budget because a lot of clients have taken action and gone through planning based on the current rules. It would therefore be a lot of work to rejig this retrospectively, not to mention being totally unfair.

This change would be an easy tax grab, but it would take away a lot of people’s trust in pensions and the government.

Gemma Siddle, director, Eldon Financial

Heaven: simple pension and tax rules

Clarity is key and simplification could bring this. A heavenly budget for me would see ‘one rule for all’ on pension inheritance taxation. This would give certainty to those who need to plan. It does not matter what the rule is, just ditch the ambiguity.

Simplification of the inheritance tax (IHT) nil-rate band rules (perhaps incorporating the residence nil-rate band into the standard nil-rate band) would help people understand their own position. There are too many ifs and buts in this at the moment.

If there was a clear cap on care costs, a lot of older people would pass more capital down the generations during their lifetime. They would have a much better idea of what they may need. This would prevent a major worry for many and the gifting would stimulate the economy by being spent on houses, childcare, and other priorities of the younger generation. Or it would be put into their investments and pensions for the longer term.

Gemma Siddle, director, Eldon Financial

Hell: more uncertainty and cuts

Hell would be more change, uncertainty and transitional rules – across an increasing number of areas.

The introduction, then cutting, of the dividend allowance, the annual allowance and the LTA over recent years mean the government has not set clear priorities. This in turn causes difficulty for people planning for themselves.

Policy has resulted in a lot of nuances meaning people can get caught in traps, with the risk of large tax bills. At the other end of the spectrum, people are taking advantage of the ambiguity of the tax rules to maximise return.

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