3 March 2020
New Chancellor Rishi Sunak has confirmed that he will deliver his first Budget on 11th March 2020. Given the Conservative Party majority, the Government is able to radically reform public spending and the UK tax system. Brewin Dolphin, the wealth manager, recommends four reforms on behalf of its clients:
- Keep pension tax relief
You receive tax relief on any pension contributions that you make up to the permitted annual limits1 at the highest rate of income tax that you pay.
Liz Alley, Divisional Director, Brewin Dolphin says: “Pension tax relief encourages people to save for the long term and our clients tell us that they want it left alone. The danger of removing this incentive is that the Government is likely to annoy millions of voters. If it discourages saving, then the burden will ultimately fall on the state instead.” - Increase pension auto-enrolment contributions
Auto-enrolment has been very succesful in getting people saving, but there is a danger that the current minimum contribution level of 8% may not be enough to provide a comfortable retirement for pension savers and needs to be increased.
Liz says: “We should fill the savings gap by following the Australian model. In Australia, they started small with contributions at 3% and 4% in 1992 and increasing by 0.5% a year. By 2002, the employer contribution had reached 9%. Australia’s superannuation scheme is now one of the largest in the world and their retirees are much more likely to have a comfortable retirement and will be less reliant on the state2. We should not reinvent the wheel. On behalf of our clients, we call for an annual increase of 0.5%.” - Reduce inheritance tax complexity There are rumours of a potential cut in inheritance tax (IHT) from 40% to 10%, but there’s a lot of complexity surrounding (IHT). We welcome simplification.
Liz says: “Our inheritance tax system in the UK is very complicated and while many think this is just a problem for the rich, that simply isn’t the case. With the average house price now £230,292, many more people are affected by inheritance tax now. We welcome simplification for our clients and to ensure that anyone who saves hard has a better understanding of the system.” - Remove the £1m pension lifetime allowance To most people £1m is a huge amount of money, unless you are talking about a pension. To encourage more people to save, removing this cap makes perfect sense.
Liz says: “Many readers will be surprised to learn that, without taking advice on retirement options, a 65-year-old couple with a £1m pension pot, would be able to secure an annual annuity retirement income of £23,562.96, less than £2,000 each month. Even though this would increase each year in line with the retail price index (RPI), this is well below most people’s expectations. Despite this, some people have stopped funding their pension early because they are worried they will exceed the lifetime allowance and end up with a high tax charge.”
1Up to an annual limit of £40,000 for those earning up to £150,000 after which is tapers down to £10,000 if you earn over £210,000
2https://en.wikipedia.org/wiki/Superannuation_in_Australia
PRESS INFORMATION
For further information, please contact:
Richard Janes richard.janes@brewin.co.uk / Tel. +44 (0) 20 3201 3343
Anita Turland: anita.turland@brewin.co.uk / Tel: (0) 20 3201 4263
Payal Nair payal.nair@brewin.co.uk / Tel: +44 (0) 20 3201 3342
Camarco: brewin@camarco.co.uk / Tel: +44 (0) 20 3757 4980
NOTES TO EDITORS
Disclaimers:
- The value of investments can fall and you may get back less than you invested.
- The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd.
- Past performance is not a guide to future performance.
- We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. In addition we reserve the right to act as principal or agent with regard to the sale or purchase of any security mentioned in this document. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at www.brewin.co.uk.
- This information is for illustrative purposes only and is not intended as investment advice.
- No investment is suitable in all cases and if you have any doubts as to an investment’s suitability then you should contact us.
- If you invest in currencies other than their own, fluctuations in currency value will mean that the value of their investment will move independently of the underlying asset.
- Any tax advantages mentioned are based on personal circumstances and current legislation which are subject to change.
- The information contained in this publication is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.
- Brewin Dolphin is authorised and regulated by the FCA.
About Brewin Dolphin
Brewin Dolphin is a UK FTSE 250 provider of discretionary wealth management. With £48.5* billion in total funds, it offers award-winning personalised wealth management services that meet the varied needs of our clients including individuals, charities and corporates.
We give clients security and wellbeing by helping them to protect and grow their wealth, in order to enrich their lives by achieving their goals and aspirations. Our services range from bespoke, discretionary investment management to retirement planning and tax-efficient investing. Our focus on discretionary investment management has led to significant growth in client funds and we now manage £41.8* billion on a discretionary basis.
Our intermediary business manages £14.3* billion of assets for over 1,700 advice firms either on a discretionary basis or via our Managed Portfolio Service.
In line with the premium we place on personal relationships, we’ve built a network of 33 offices across the UK, Jersey and Dublin, staffed by qualified investment managers and financial planners. We are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients’ needs at the core.
*as at 31st December 2019