Autumn Budget – advisers predict CGT changes most likely

Royal London, the UK's largest life, pensions and investment mutual, asked advisers their thoughts on the most talked about Budget in recent years.

Leading by a considerable margin, an increase in CGT appears top of mind for advisers with 78% thinking it is one of the most likely announcements on Budget Day, while 50% are predicting changes to pensions tax relief followed by 38% who think the Chancellor will introduce income tax on defined contribution death benefits for someone who dies before age 75. 25% are predicting a change to salary sacrifice for employer contributions. At the other end of the spectrum, only 8% of respondents think the chancellor will make changes to ISA limits.

When asked what they would do if they were Chancellor and had to save money on pensions, the responses were varied, with everything from reducing tax relief on contributions (57%) through to NI changes (22%). Notably, only 8% would reduce the level of tax-free cash to £100,000.

Just over a third of those questioned (36%) have been proactively contacting clients about the Budget. Conversely over 80% of advisers have seen an increase in the number of clients contacting them about taking action in relation to their pension, with that increase being significant for around a quarter of those we surveyed. Of those getting in touch, 94% of clients who hadn’t taken any tax-free cash are asking about taking it all ahead of the Budget. A smaller, but still significant 40% of respondents have clients who had planned to take tax free cash in stages and move the rest to drawdown or UFPLS but now want to take the full amount. 7% have asked about taking tax free cash and buying an annuity.

While most advisers predict a change to CGT, they have seen a much smaller number of clients (41%) getting in touch to take action in relation to assets that might be subject to CGT.

Jamie Jenkins, Director of Policy at Royal London, said:  

"Every fiscal event comes with its fair share of speculation, but this one is shaping up to be the most talked about Budget for years, with most commentators now expecting a range of tax changes to be announced.

"At this stage, most advisers are fully expecting changes that will affect their clients and the advice they provide to them, but the speculation is shifting on a daily basis, leaving advisers in a difficult position.

"Meantime, it’s clear that clients are getting anxious about possible changes that may affect their finances, and some are bringing forward elements of their retirement plans."