Claire Trott: A case of the Budget Blues

The morning after Budget day found me waking up in my hotel rather down. It wasn’t just that I had chosen a really cheap hotel rather than get the train home and back in the morning and there was no tea, but more the fact that the Budget could have gone so much further, especially after the ‘u-turn’ the week before on pension tax relief. In all honesty I am not convinced it was a U-turn at all, I suspect that no real decision had been made. The quick fix that the Chancellor probably thought about would have left him with a large amount of egg on his face when all the implications we have been shouting about for months were mysteriously uncovered.So, I popped my trainers on and headed off into the City, down to the river and in the direction of Canary Wharf. Running is a great time to think, provided you still look where you are going. One of the things that I was pondering is that really we are still dealing with the fall out of other issues created by changes he has made, in a rushed manner and there are still things that are yet to come into force. So, perhaps I should be grateful for small mercies and the tidying up we did see in his announcements.The annual allowance taper is still the talk of the moment in my world, I know some find it hard to feel any sympathy for people who are earning significant amounts of money, but really it is the advisers and paraplanners that I feel sorry for. They are expected to be able to tell someone what they can pay into their pension scheme in the tax year, but this is becoming near on impossible, unless they have a single source of salaried earnings where they will know what their total income will be from one year to the next.This isn’t generally the case for those impacted by the annual allowance taper, earnings within the definition of threshold and adjusted income include not only income from employment and self employment but also property rental income, income from shares (dividends), income from savings interest and pension income, including state pension. All of this can add up and as the annual allowance reduces by £1 for every £2 of adjusted income over £150,000, then getting anything vaguely accurate is near on impossible.When you also have to include pension contributions within this you get a chicken and egg situation, you need to include what you are going to pay in the calculations to see if you are able to pay it. To be honest, this is simple really for a money purchase scheme, but the figures you need for a final salary scheme may not be as easy to come by.All in all, the entire process is a bit of a mess but had the Budget announcements gone further, we could have sorted out a lot of legacy issues to make the whole area of pensions simpler and easier for people to understand. If you understand something then you are more likely to engage with it. That maybe why we had the Lifetime ISA announcement, but they have even managed to make that complicated.

Claire Trott: A case of the Budget Blues

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