• The Treasury has confirmed the new Government will hold its first Budget on 11 March 2020 (https://www.gov.uk/government/news/chancellor-launches-budget-process-to-usher-in-decade-of-renewal)
• Chancellor Sajid Javid promises ‘decade of renewal’ and is expected to borrow to fund post-Brexit spending spree
• Conservative manifesto promised action on a number of pensions issues, including the net pay problem and tapered annual allowance
• With a significant parliamentary majority, Boris Johnson may be emboldened to pursue more radical tax relief reform
Tom Selby, senior analyst at AJ Bell, comments:
“Despite winning a huge increased majority at the general election, we still don’t really know what Boris Johnson’s vision for the UK is beyond ‘getting Brexit done’. This first Budget should give us a much clearer idea.
“On pensions, there are two key manifesto pledges we should hear more on between now and 11 March: net pay and the annual allowance taper.
“The net pay issue has plagued low earners for years, with those in the wrong type of pension scheme missing out on valuable tax relief. The Conservatives have promised a ‘comprehensive review’ to fix the problem, although it is by no means certain a solution will be found in the next three months.
“The taper is perhaps the more pressing problem politically, particularly given the impact it has had on high-earning workers in the NHS. The Conservatives pledged an ‘urgent review’ within 30 days of entering Government – meaning in theory at least there are just days left to fulfil this promise.
“There is more than a whiff of radicalism about this Government, however, with the hugely influential Dominic Cummings at the heart of Number 10 recruiting ‘assorted weirdos’ to drive fundamental reform across Whitehall.
“It is therefore possible these reviews of specific pension tax problems will open up Pandora’s Box, focusing Treasury attention on the overall structure – and cost – of pension incentives. In 2017/18 the net cost to the Exchequer of tax and national insurance relief on pensions was roughly £35 billion.
“If a radical overhaul of tax relief is in the offing, it is important this is carried out sensibly and doesn’t risk the fragile savings culture currently being fostered in the UK. Ripping up the roots of our savings system without first understanding how this might affect the propensity of people to save for retirement would be a huge risk and could undermine the good work so far done under automatic enrolment.”
