Royal London responds to today’s (3 March) announcements affecting pensions and personal finance in the Chancellor’s Budget.
Jamie Jenkins, Director of Policy & External Affairs at Royal London, said:
“This was clearly a Budget that needed to focus on boosting the economy as the pandemic eases, and there are a number of measures to see through the remaining months of lockdown, both for businesses and individuals. But there is also a recognition that the deficit will need to be reduced and the debt managed in the years ahead. The Chancellor has a difficult task in finding the balance between stimulus and taxation as he navigates this course.”
Responding to the Chancellor freezing lifetime allowance at current level until April 2026, Clare Moffat, head of intermediary development & technical at Royal London, said:
“Given the economic backdrop, anything that raises tax income is understandable. However, it’s becoming painfully difficult for people approaching retirement to plan with any certainty when the rules are constantly changing around how much they can save during their lifetime. Building a pension pot for retirement is a long term objective and needs some stability in the tax rules to allow people to plan effectively.
“The lifetime allowance usually rises in line with CPI every year and a five year freeze means the lifetime allowance will be substantially lower by 2025/26 that it otherwise might have been. We will see more people potentially falling foul of a tax charge.”
Responding to the extension of the furlough scheme and self-employed grants up until September 2021, Sarah Pennells, head of financial capability at Royal London, said:
“With the extension of nationwide lockdowns and plans to phase in their easing through much of the first half of the year, it was inevitable that support schemes would need to continue. However, there is a difficult road ahead for many businesses in returning to normal trading, and many will be unable to do so. There is a need to start looking at what a post-pandemic employment landscape looks like and what needs to be done now to prepare for it.”
Responding to the Chancellor making no change to income tax, NI or VAT Sarah Pennells, head of financial capability at Royal London, said:
“The previous commitments made by government to avoid any further rises in tax and VAT have been maintained, and it’s welcome when the country needs to encourage growth in consumer spending. However, the freezing of the personal allowance and higher rate threshold from 2022, will create additional higher rate taxpayers.”
Responding to the extension of stamp duty holiday, Sarah Pennells, head of financial capability at Royal London, said:
“This will be particularly welcome for those who are already in the house buying process, but struggling to complete their purchase before the deadline.”
Responding to the continuation of £20 Universal Credit uplift for 6 months Jennifer Gilchrist, protection specialist at Royal London, said:
“The extension of the £20 uplift will be widely welcomed by people who have become reliant on having the extra support in these difficult times.”
Responding to the no-interest loans scheme pilot Sarah Pennells, head of financial capability at Royal London, said:
“We’ve yet to see the detail of this pilot, but if this scheme helps vulnerable consumers to borrow to pay for unexpected costs, interest free, rather than resorting to high-cost credit, it should be welcomed. Having a financial buffer, by way of savings, is invaluable, but we know that for some people, it’s a real challenge.”
Responding to the increase in contactless payments limit to £100 Sarah Pennells, head of financial capability at Royal London, said:
“This will be widely welcomed by those who routinely tap their card to pay, and is clearly in line with a gradual move away from cash payments. However, it does make card theft more attractive and could also encourage people to spend more – possibly more than they can afford. Some countries are developing innovative ways to deal with contactless fraud, and we should consider what might work well in the UK as well as looking at ways of helping consumers stay in control of their spending.”
About Royal London:
Royal London is the largest mutual life insurance, pensions and investment company in the UK, with assets under management of £139 billion, 8.6 million policies in force and 4,348 employees. Figures quoted are as at 30 June 2020.