New Chancellor Rishi Sunak has confirmed that he will deliver his first Budget on 11th March 2020. We will be keeping our eye out for four things:
1. Encourage Pension Saving by keeping pension tax relief
We know that people are living longer and therefore need more in retirement – Pension contributions receive tax relief up to the permitted annual limits 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.”
2. Encourage Pension Saving by increasing pension auto-enrolment contributions
Auto-enrolment has been very successful 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 state. We should not reinvent the wheel. On behalf of our clients, we call for an annual increase of 0.5%.”
3. 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.”
4. Encourage Pension Saving by removing the £1m pension lifetime allowance
To most people £1m is a huge amount of money, unless you are talking about a pension. We’ve already said that people are living longer and therefore need more in retirement - To encourage more people to save, removing this cap therefore 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.”
If you would like to speak to one of our experts on any of the issues in this article, please get in touch.
 Up 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
The value of investments and any income from them 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. 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. 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.