The introduction of Lifetime ISAs is a small and targeted version of a pensions ISA (Pisa). The Chancellor is leaning to Pisa without going there quite yet.
Lifetime ISA: This is good for those eligible, more tax efficient than pensions for the self-employed. Employees would lose out if used as an alternative to pensions if this means losing employer contributions.
Higher ISA limits from 2017 – further expansion of ISAs. Are ISAs “value for money”? Seems an inconsistency which will no doubt change in due course.
Annual allowance, Lifetime Allowance, tapering of tax relief – previous speculation of changes proved unfounded for all of these – for better or for worse depending on your viewpoint.
National Insurance – no changes on interaction with pensions – the worst predictions failed to materialise.
Salary sacrifice – review but pensions intended to be not affected by review. May impact on flexible benefit packages but not pensions per se.
Tax relief on pensions review – deafened by silence – all we got was a joke intended to distract us about abolishing the Liberal Democrats rather than any indication of a further review timetable. This was about as uninformative as possible, although on the plus side the joke was well delivered.
Employers able to pay up to £500 for financial advice without incurring income tax or NI – positive, helpful, implies robo advice may not be enough
Consultation – members using up to £500 of pension funds for advice – again helpful. All in all a good budget for the IFAs still in the at retirement IFA market! Of course, money is not created from nothing and it doesn’t reduce the cost of advice – only how it may be paid for.
Pensions Wise, Money Advice Service and TPAS – merger review. Not much of a thumbs up to an entity which he created and started only last year. Pensions Wise being overtaken by other solutions coming to market.
Dashboard by 2019 – the industry will be forced to do it – no specification of whom, and how it is paid. Appears to be the end for “pot follows member.” Not sure that is something to be mourned.
Public Sector employer contributions – set to rise due to lower calculated discount rates. Some estimate the material impact is 2% of pensionable salary. Material hit to all public sector entities with unfunded schemes.
Overall comment – more measures in the budget than you could feasibly imagine – not much simplification going on. Of course, it may be Mr Osborne’s last budget (although unlikely). The determinant of future changes in pensions tax may be whether he remains chancellor and the amount of money which needs to be saved. Stability remains elusive.
Find out more about the Lifetime ISA here