As expected, today’s Budget focused on:
- maintaining support for businesses and individuals during the remainder of the Covid-19 pandemic,
- starting the work of containing the ballooning national deficit, and
- laying the foundations for the future economy (with plans announced to promote green growth, change the economic geography of the country and to ensure we are a global, outward looking nation).
Key measures include:
- a further extension of the Coronavirus Job Support Scheme and support for the self-employed until the end of September 2021 (with some tapering of Government support from July)
- freezing the income tax personal allowance and higher rate threshold at 2021/22 levels (i.e. £12,570 and £50,000 respectively) until April 2026
- increasing Corporation Tax for larger businesses to 25% (from 19%) from April 2023
- the creation of 8 free ports in England based in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside, with more to follow in Wales, Scotland and NI
- confirmation of the Government’s plans to launch green bonds this year and new plans to launch a new retail savings product through which individuals can support green projects, and
- updating the remit of the Money and Policy Committee of the Bank of England, which is responsible for setting monetary policy (including interest rates) to achieve price stability and to support the Government’s ecomic policy so that within the remit, the description of the Government’s economic policy now reflects the importance of environmental sustainability and the transition to net zero.
There were very few measures in Today’s Budget which directly impact pension schemes.
However, the Chancellor did announce that:
- the Lifetime Allowance will be maintained at its current level of £1,073,100 until April 2026, and
- the Government will consult within the next month on whether certain costs within the charge cap affect pension schemes’ ability to invest in a broader range of assets. This is to ensure pension schemes are not discouraged from such investments and are able to offer the highest possible returns for savers. DWP will also come forward with draft regulations to make it easier for schemes to take up such opportunities within the charge cap by smoothing certain performance fees over a multi-year period.
Pension tax relief
Although the Budget did not contain any significant pensions-related announcements it is worth noting that, in a change from usual practice, the Government is due to publish a number of tax consultation and policy papers on 23 March 2021 (which is being dubbed “Tax” day). It is possible that the Treasury could use this to test potential reforms to pensions tax relief.
It is also expected that there will be a second Budget in the Autumn when the Chancellor will know with greater certainty what additional fiscal measures are required to support and rebuild the economy and to rein in the national deficit.
Commenting on the Budget, Samantha Brown, Regional Head of Employment, Pensions and Incentives says:
“Unsurprisingly, the Chancellor steered clear of announcing radical measures such as reforming pensions tax relief in today’s Budget, preferring not to rock the boat while we are still in the midst of the storm. The most significant measures from a pensions perspective are the plans to freeze the lifetime allowance at its current level until April 2026 and to review the way the DC charge cap works to encourage greater investment in infrastructure by auto-enrolment schemes. However, pension schemes and corporate sponsors will also welcome the range of measures announced to support the economy and stimulate future growth and investment.
In addition, although today’s Budget did not contain any significant pensions-related announcements I would not rule out the Government revisiting the case for reforming pensions tax relief in the near future given the figures involved and the Chancellor’s clear intention to get the deficit under control.”