Tag Archives: Spring Statement

Economy & Jobs News, Tax

The Spring Budget 2024 sees tax cuts and a continued push to unlock pension investment potential

In this year’s Spring Budget, the Chancellor Jeremy Hunt focused on tax cuts made possible through reported progress in the UK economy and to encourage growth in the next few years.

Where pensions are concerned, the Chancellor reiterated messaging over the last few months from the Mansion House reforms and Autumn Statement on targeting value for money for pension scheme members and encouraging pension funds to drive further growth in the UK economy.

Reduction in National Insurance contributions

The government announced plans today to reduce the basic employee rate of National Insurance contributions (affecting approximately 27 million people) from 10% to 8% with effect from 6 April 2024; a further decrease from the recent shift on 1 January 2024 from 12% to 10% and the lowest the rate has been set since the early 1980s.

From an employee benefits angle, this will make salary sacrifice arrangements (where employees can make National Insurance savings on certain benefits) a little less attractive for employees.

Simon Hubbard, a Principal Consultant at Quantum Advisory, said:

“Further reductions in National Insurance contribution rates will be welcomed by many. The change, at face value, indirectly makes saving into a pension less attractive for employees where contributions are paid before the deduction of tax and National Insurance through an arrangement known as salary sacrifice. This change reduces the National Insurance that employees save by using such an approach. 

“These tax cuts must be viewed alongside the freeze on income tax thresholds until 2027. Given this, we expect that salary sacrifice arrangements will remain the most efficient way for employees to pay their pension contributions and there is no impact on the National Insurance savings made by the employer.

“Cuts in National Insurance will only benefit income earned through work, so pensioners will not benefit in the same way that employees do.”

Disclosure and value for money for DC Schemes and LGPS arrangements

The government reiterated planned changes in disclosure requirements for defined contribution (DC) pension funds, such that funds will need to publicly state their level of UK investment and compare their performance level against other schemes (at least £10bn in size).

Where it is determined that schemes are providing relatively poor returns for members compared to that provided elsewhere, schemes may not be allowed to take on new members.

There will separately be revised reporting guidance for Local Government Pension Scheme (LGPS) Funds from April 2024, such that a summary of asset allocation, including UK equity investment, as well as providing greater clarity on pooling will need to be disclosed.

Simon Hubbard, a Principal Consultant at Quantum Advisory, said:

“The announcement from the government will help concentrate DC pension funds on delivering the best returns for members whilst encouraging further investment in the UK economy. We welcome the aim to target good investment returns for every member. Careful consideration will need to be given in the coming months on how to encourage this for DC schemes whilst allowing funds to invest in long-term growth assets that may be volatile in the short-term.”  

Abolition of the Lifetime Allowance

The Lifetime allowance (LTA) is being removed from 6 April 2024 following the Spring Budget announcement last year; a move that is hoped to alleviate pressure on the NHS as well as other industries to prevent early retirements from experienced individuals.

HMRC have since referenced that there will continue to be a fixed cap on tax-free cash sums of £268,275 (25% of the current LTA) and a fixed cap of £1,073,100 (the current LTA) on the total tax-free cash sums that can be paid to an individual.

Simon Hubbard, a Principal Consultant at Quantum Advisory, said:

“The abolition of the LTA will, as a whole, simplify the pensions industry and encourage more to save for retirement and work for longer. It remains to be seen whether this policy will change if there was a new government following the imminent General Election given the Labour party’s opposition to the abolition of the LTA.”

State Pension

The government has committed to applying the triple lock to the State Pension for 2024-2025, such that it will increase from £10,600.20 pa to £11,502.40 pa.

Simon Hubbard, a Principal Consultant at Quantum Advisory, said:

“The triple lock guarantee for 2024/25 (which the Labour Party has also committed to retaining) will ease pensioner fears, particularly given the recent years of high inflation. Whilst this news will be welcomed, wider issues remain with the functionality of the State Pension, which is becoming increasingly more expensive in real terms due to current birth / death rates. We expect there will be further discussions around the State Pension following the election.”

Pension ‘Pot for Life’

The government is continuing to consult on plans to allow individuals to choose one provider to hold their pension pot throughout their life; aiming to improve outcomes for savers as well as convenience of access.

Simon Hubbard, a Principal Consultant at Quantum Advisory, said:

“We look forward to the government providing further detail on the lifetime provider model they have set out, noting that challenges with economies of scale will need to be carefully managed.  This will help people who change jobs frequently or who have multiple jobs at any one time, because under the current system some workers can end up with a large number of small pensions which can be difficult to manage and to keep track of.”

ISAs

The government announced the launch of a new British ISA which will allow individuals to invest £5,000 tax-free cash per year in UK assets in addition to the current ISA allowance of £20,000. The government intends this to help the UK economy grow.

About Quantum Advisory

Established in 2000, we are an independent, owner-managed actuarial and employee benefits consultancy that provides straight-talking, no-nonsense advice to employers and pension scheme trustees.  We design, maintain and review pension schemes and related employee benefits so that they operate efficiently and effectively.  We also help communicate these benefits in a straightforward way so that employees understand their real value.

 

Simon Hubbard

Principal Consultant

Quantum Advisory

Energy, News

VAT move on renewable energy welcomed by AceOn

Leading battery and energy storage pioneer AceOn today gave a cautious welcome to Chancellor Rishi Sunak’s Spring Statement.

The Telford-based company said the Chancellor’s move to scrap VAT on renewable energy products was a ‘good starting point’ but called on the Government to be more ambitious in its support of green technology.

The Chancellor revealed that he is removing the current VAT levy on some green products such as solar panels and heat pumps for the next five years.

AceOn Energy managing director Richard Partington said the move was welcome – but needed to be backed up with a raft of further measures to support the renewable energy sector.

“We have been calling for the axing of VAT on renewables ever since it was increased in 2019.

“With prices for conventional energy spiralling out of control and a growing realisation that we are in the last chance saloon as far as climate change is concerned, this is long overdue but still very welcome news.

“But the Chancellor cannot now sit back and think he has done everything he can to drive the uptake of the clean, renewable technologies which will help this country address the climate change crisis.

“There was no announcement of new, large-scale energy spending or a windfall tax on fossil fuel companies, which would help move the needle firmly in favour of the green economy.

“There needs to be more action to make the installation of renewable energy an integral part of housing policy – both in new and existing homes. Intelligent use of incentives to help consumers and businesses make the switch from fossil fuels is vital if we are to achieve our zero carbon targets.

“If the Chancellor is serious about reducing energy bills for homes and businesses, he needs to do more to encourage uptake of battery storage. This is a clear and effective way to make energy more sustainable and drive down bills for years to come.

“We would also like to see greater support for our social housing sector so that housing associations and local authorities can invest fully in the new, green technologies which will provide clean power for generations to come, help tenants lower their bills and also start building the national energy security which we so urgently need in light of the current situation in Ukraine.”

AceOn has just launched an exclusive partnership with challenger OFGEM-regulated energy supplier Rebel Energy to deliver lower bills for social and affordable housing tenants through a pioneering system which captures solar energy and intelligently stores it for use when the tenant needs it.

“Through our partnership we can offer local authorities and housing associations a green deal which encourages investment in renewable power to meet carbon reduction targets, while lowering household bills and providing an additional revenue stream for the landlord,” Richard said.

“This sort of win-win-win innovation is exactly what is needed if this country is to hit its Net Zero targets and help prevent millions of people slipping into fuel poverty.”

 

AceOn has over 30 years’ experience in the design and manufacture of custom-built battery packs and the distribution of industrial and consumer batteries to the worldwide market. The energy division provides a training, service and distribution centre to offer a full turnkey solution for residential and commercial battery energy storage systems.

The group has built a reputation as being specialists in solar and battery technology, particularly the development of bespoke, custom-built battery packs.