Lack of growth is piling pressure on pensions and retail investing to “save” the UK economy, according to Rachel Vahey, head of public policy at AJ Bell.
Speaking on the FT Adviser podcast, Vahey alongside Charlie Barnes, head of employment legal services and Stephanie Court, private client tax director both at RSM UK, dissected the Spring Statement and what it could mean for future fiscal events.
“It was a bit of a peculiar fiscal event. It was neither fish nor fowl. It was neither a proper spring forecast like the chancellor really wanted, and it wasn’t a Budget either.
“One of the nicer surprises was the OBR forecast for growth. Now that was obviously not very good for this coming year as they cut it by half, but for future years it was showing a better growth forecast than was predicted in the autumn.
“But there’s not a lot of growth around and because of that, it just piles the pressure on pensions and retail investing to really come in like a knight in shining armour, riding on our horse to save us all. And the reliance on tapping pension funds for UK investment is only going to continue in the same vein,” Vahey explained.
Court felt there was a “missed opportunity” from Rachel Reeves to address some of the “trepidation and uncertainty” for taxpayers.
She said: “We’re seeing fear of future tax increases driving decisions. At the moment, the pensions and IHT set to come in in April 2027 is starting to drive people to think what could happen to the 25 per cent tax free income drawdown from that.
“Perhaps even making investment decisions based on fear of future tax changes, which is a difficult position for a lot of people to be in.
“Certainly the longer term forecasts that came out on growth is showing that it’s not likely to impact in the next couple of years.
“So it really does make it look very likely that tax rises are going to be increasingly inevitable at some point in the near future, so all eyes are going to be on the autumn Budget.”
Barnes reiterated there would be a concern from business owners of what could be on the horizon in the next six months leading up to the Budget.
“From a business perspective, they’ll be focused on what’s about to happen from April 1st with effectively a significant increase in wage costs from the employer NICs increases, lowering the threshold, and then the national minimum wage rate rises, which they will still be trying to address.
“And there will be concern around what this does mean around the potential then for further tax rises coming in the autumn Budget,” he added.
The conversation also touched on ISA reform, the potential for simplification, and the need for certainty in tax policy, to hear more click the image above.
alina.khan@ft.com
