Published: Sunday 13th March 2016 by The News Editor
The “three Ps” of pay, pensions and petrol prices are among people’s top concerns for this week’s Budget, according to research.
And as Wednesday approaches, finance experts predict that some further tweaks to pensions could be on the cards, as could changes to the amount of income that people can earn tax-free.
More than seven in 10 (72%) people want to see an increase to the amount they can earn before tax, while 43% want a cut or freeze to fuel duty and 42% want no further changes to pensions, according to a survey from credit checking company Noddle .
Three-quarters (74%) of people also want to see a greater enforcement of taxes on big business by the Government, according to the findings among more than 1,000 people.
Jacqueline Dewey, managing director at Noddle, said: “People told us their main concerns for the Budget are three Ps: pay, and earning more before tax; petrol prices; and pensions .”
Danny Cox, head of retirement policy at Hargreaves Lansdown, feels Chancellor George Osborne is likely to continue with pledges to raise the amount people can receive in income before paying tax. The threshold is already due to increase to £11,000 from April 6.
He also expects there to be plenty of references in the Budget to measures to clamp down on tax avoidance.
Mr Osborne has already abandoned plans for a raid on pensions tax relief in the Budget following stark warnings from experts and resistance from within Government.
The proposals to make pensions more like Isas would have reversed the way pension pots are currently taxed, so money going in could have been taxed up-front, while cash withdrawn would be tax-free.
Mr Cox said that while the Chancellor has “pulled the plug” on pension tax relief changes for now, ” all eyes will be on where else he might be looking to raise revenue”.
He said Mr Osborne “could still make some big changes to pensions” with a possible further reduction in the lifetime allowance, which is already being reduced from £1.25 million to £1 million, or further caps on pension contributions for high earners.
Mr Cox continued: ” We should also get details of the Help To Save scheme, announced back in January, to help people on low income build a rainy day fund.”
Big changes to savings and pensions are already on their way.
From April 6, a new personal savings allowance will mean many people no longer have to pay any tax on their savings interest.
Basic rate taxpayers paying 20% tax will be able to earn up to £1,000 in savings interest tax-free and higher rate taxpayers paying 40% tax will be able to earn up to £500 in tax-free savings income.
The change is expected to weaken savers’ reliance on Isas, which have traditionally had tax advantages over other types of accounts.
The new allowance will include account interest from bank and building society accounts as well as accounts with credit unions and NS&I (National Savings and Investments) and other types of income, such as that from government or company bonds.
Interest earned from tax-free Isas will not count towards the personal savings allowance.
According to Moneyfacts.co.uk, the current cash Isa rates on offer are among the worst on its records.
But Moneyfacts has cautioned people against forgetting about Isas altogether, as eventually savings interest rates will start to go up and the proportion of savers’ interest that they can earn tax-free outside an Isa will subsequently diminish.
Pensions, which have already seen huge changes in recent years with the introduction of automatic enrolment into workplace pensions and the new retirement freedoms for over-55s, are set for another shake-up.
A new simplified state pension will be launched for people reaching state pension age on or after April 6. The aim is to make the pension easier to understand, with people knowing from a younger age how much they are likely to get.
The full new state pension rate for 2016/17 will be £155.65 a week. Generally, people will need at least 10 qualifying years of National Insurance contributions records to get any state pension.
Age UK has warned that around 70,000 people in their 50s and 60s will miss out entirely on the new state pension between now and 2030 – as s ome 50,000 women and 20,000 men do not have the minimum number of qualifying years of contributions.
Meanwhile, from April 1, buy-to-let landlords face a three percentage point stamp duty hike on current rates. The Royal Institution of Chartered Surveyors (Rics) has said it expects to see a cool-down in demand for investment properties as this comes into place.
The Government has also been urged to press ahead with plans for a “pensions dashboard” – where people can see all their pots in one place, although Pensions Minister Baroness Altmann has said the industry is still some way off being able to do this.
Former pensions minister Steve Webb, now director of policy at Royal London, said a timetable is needed for the pensions dashboard, adding : “It won’t happen without a lead from government.”
Mr Webb said he hoped to see a “period of stability” with pensions, adding they should be “left alone” for the rest of this Parliament.
Published: Sunday 13th March 2016 by The News Editor