Autumn Budget 2024 commentary

Commenting on the announcements made by The Chancellor in today’s Autumn Budget, Jamie Jenkins, Director of Policy at Royal London, said:

“This was clearly going to be a challenging Budget, with the Chancellor seeking to address the nation’s funding gap, while at the same time trying to shore up public services and encourage economic growth. It is yet to be seen exactly how the changes announced today will affect businesses in practice, and how their response plays through to employment and wages. Hopefully, however, the most immediate and pressing decisions on taxation and public spending have now been made, and there will be some stability and certainty for both businesses and households in the years ahead.”

Employer NI

“An increase in employer NI will represent additional costs for employers.  

“As a result, we may see an increase in schemes moving to a salary exchange arrangement as the increase will apply to salary paid and not pension contributions. 

“Furthermore, 'business owning' employers might want to consider how they structure taking money out of the business to ensure the most 'tax efficient' outcome.”

Pensions and IHT

'“The Chancellor has evidently recognised the need to nurture our growing retirement savings as a nation, and we now await the details of the first phase of the Pensions Review as to how pension assets might further support the economic growth agenda.

“While most people will still benefit from their estate falling under the limits for Inheritance Tax, many people will have planned their retirement with a different understanding of how their wealth would be taxed and may have started taking income on this basis.

“Bringing inherited pensions into the estate for IHT will create some headaches for advisers and their clients, but overall, this shouldn't damage the central incentive to save into pensions.

“However, many advisers will now need to contact their clients and need to rethink their approach to estate planning and income withdrawals. Helpfully, the changes don't take effect until April 2027.”

Trevor Greetham, Head of Multi Asset at Royal London Asset Management, had the following statement for the investment press: 

"Labour’s first budget takes a lot of pain up front, presumably in the hope that stronger growth and easier times will come as the next election approaches. Proposed tax rises of up to £40bn by the end of the parliament are of the same order of magnitude as the estimated shortfall in government revenues due to Brexit, so this budget can be thought of as a fiscal reckoning that was delayed by the pandemic. Keir Starmer has committed not to explore rejoining the EU Single Market or Customs Union, however, and therefore the government is basing a large part of its growth strategy on rule changes to allow an increase in public investment.

"If all goes to plan, greater political stability and a more productive economy should support UK-listed companies and the commercial property market over a period in which heady global equity valuations and geopolitical uncertainty could prove troublesome for investors."

Trevor also commented on government debt, bond markets and the need for inflation hedges:

“With the UK’s general government debt to GDP ratio over the 100% mark, much will depend on the willingness of the gilt market to finance increased spending at reasonable rates of interest. In common with other developed economies, it will be hard to avoid a steady increase in debt burdens over the next few decades as population ageing gathers pace, especially if birth rates remain low.

"Bouts of higher than expected inflation are likely to be part of the solution to work down debt, as we saw in the post-War period. 'Long term savers' can mitigate this risk by investing directly in commodities like gold and oil as part of a diversified multi asset portfolio.”