Autumn Statement is just what business needs – but heed pension warning

The Government’s first – and last – Autumn Statement will be remembered for its sensibleness.
When faced with a crisis, Ronald Reagan had a catchphrase: “Don’t just do something. Stand there.”
May’s Chancellor is cut from the same cloth. Philip Hammond is not about fancy initiatives, meddling too much or tweaking things for the sake of a good headline. He does something only when it is required.

At a time when Brexit is going to change everything, we needed a sensible Autumn Statement from a government that lets businesses just get on with it.

Pension warning

There was confirmation that the ‘triple lock’ policy on the state pension would remain – for now.

Philip Hammond gave a very clear flag in the detail behind the budget that the higher rate tax relief on pensions is under serious threat.

The budget notes describe this as unsustainable and we expect this to be removed next year. It’s going to have an impact on higher rate taxpayers so we would recommend those hit by it to increase their pension contributions as soon as possible to get tax relief.

A consultation will be launched on how best to prevent people with retirement savings from being cold-called by pension scams – which is very welcome news.

New savings bond

The Autumn Statement announced a new 2.2% fixed savings bond which will go on offer next year – but don’t crack open the champagne just yet.

The NS&I bond catches the eye but in reality it’s fairly inconsequential. Savers can only invest a maximum of £3000 in total over the three year period – making just £66 a year in interest.

The full details of the bond will be unveiled in the Spring Budget.

Savers looking to invest more, should check out the 123 bank account from Santander which pays a monthly interest of 1.5% but allows you to invest up to £20,000.

Personal Income and employee perks

From April 2017, the Personal Savings Allowance for income tax will raise from £11,000 to £11,500 and the National Living Wage will increase from £7.20 an hour to £7.50.

In 2010, the Personal Savings Allowance was £6,750 so this has gone up massively in a very short space of time, particularly when you consider our low inflation rate in that time.

The planned rise in the higher-rate income tax threshold from £43,000 to £45,000 will be pushed through and will be followed by an additional increase to £50,000 over the same timeframe.

On the other hand, perks for employees are set to cost more. Known as ‘salary sacrifice’ schemes, employees have traditionally been able to give up part of their salary for a non-cash benefit allowing them to buy gym memberships, mobile phone deals and take car allowances.

From April, the scheme will only be beneficial for people using it for childcare vouchers, cycle-to-work schemes and pension contributions – with the exception of ultra-low emission ‘green’ cars.

Clampdown on letting agents

Letting agent fees on people who rent private accommodation will be banned as soon as possible with landlords expected to pick up the costs of preparing tenancy agreements, checking references and credit checks instead.

For too long, abusive agents have been charging their tenants far too much for straightforward checks and paperwork. We will have to wait and see whether this leads to an increase in rental costs.

Regional boost

There was some good news for the North West, which shows that Theresa May seems to be standing by her first pledge as PM for a ‘one-nation Britain’.

The government has committed to raising productivity across the UK – and not just in the south. With the Northern Powerhouse Strategy, there will be £1.8bn funding for regions through the Local Growth Fund.

It will be interesting to see what this means for the North West as the new mayors are elected – I expect they will have the power to spend regionally which will allow them to invest in economically productive infrastructure.

The new £400m Digital Infrastructure Investment Fund and the commitment to rolling out fibre to more homes and businesses will also be good for our region.

No more Autumn Statements

Hammond announced a shake-up for the fiscal calendar with a scrapping of the traditional Autumn Statement.

A new Spring Statement is to be introduced in its place which will react to OBR forecasts.
This makes sense as the Autumn Statement has become a second budget in recent times. A return to one fiscal event should make life simpler for taxpayers.

It’s not the first time the UK has seen a Budget held in the Autumn. In 1993, former Chancellor of the Exchequer Kenneth Clarke merged tax and spending announcements into an Autumn Budget.

Business news

The Government recommitted to cutting the rate of Corporation Tax to 17% by 2020 and reducing the burden of business rates by £6.7bn over the next five years.

There was 100% Rural Rate Relief announced for businesses in rural areas, a cancellation of the planned fuel duty rise for the seventh year in a row (saving an average of £130 a year for car drivers and £350 for van drivers) and over £1bn pledged for improving the country’s digital infrastructure.

Under a simplification of national insurance contributions, businesses face an extra cost of £7.18 per employee from April 2017. Severance payments over £30,000 will also be subject to National Insurance. Previously, only income tax was charged.

Final Salary Pensions: Values rise post-Brexit

The value of some final salary pensions have risen dramatically in the aftermath of the UK’s vote to leave the European Union.

Following the Brexit vote on June 23, UK 10-year gilt yields fell to below one per cent for the first time ever, increasing the cost for so called “Defined Benefit” pension schemes to meet their liabilities.

Increasing pressures have led some pension schemes to make eye-watering offers to people to swap future income for a cash lump sum. The transfer valuations of some final salary pension schemes have risen by tens of thousands of pounds in a matter of weeks.

Alan Mellor said: “There are undoubtedly cases where final salary pension values have soared considerably since the Brexit vote and, in a small number of cases, the valuations can be life-changing.

“However, it is critical that people with final salary pension schemes take specialist advice before making any decision to transfer out of their scheme.

“At the moment, there are some startling transfer valuations, but this could quite easily change again by the start of next year.”

The sharp rise in transfer valuations is the result of the dramatic fall in AA-rated corporate bond yields which, in turn, track 15 to 20 year gilt yields.

It is these yields that many final salary schemes use to value their future pension liabilities.

When gilt yields and corporate bond yields decline, the cost to the scheme of meeting future pension promises goes up.

Alan added: “It is not a case that every pension scheme is passing on Brexit bonuses to those choosing to leave their scheme early. Each scheme will carry out its own calculations to determine the valuation they are willing to give a client.”

Anyone with a final salary pension can seek advice by contacting Alan Mellor on 0151 353 1066.

Spotlight: Anne Merriman Foundation

For nearly 50 years, Dr Anne Merriman has been working to relieve the pain and suffering of those most in need.

In 1992, she founded the charity Hospice Africa with the vision of ‘palliative care for all in need in Africa’. After a feasibility study in 4 countries, Uganda was chosen as the model as Hospice Africa Uganda.

Hospice Africa Uganda was the first ever in Uganda and starting with minimum funding they are now looking after 2,200 patients and have trained more than 10,000 from all over Africa.

With the average life expectancy in Uganda a mere 54 years, cancer is one of the major killers there, and an estimated 1 in 500 people will develop the disease.

But the country is severely lacking in specialists and resources to help them, with 90% dying as a result of late diagnosis.

Merriman, a 2014 Nobel Peace Prize nominee, recognised this need while working in Nairobi as the first medical director of their new Hospice. Uganda was only the fourth country to received palliative care at that time but now 35 countries are having some form but only 20 have the medications to control the severe pain of cancer.

Born in Liverpool in 1935, Merriman came into this line of work after being affected by seeing elderly people die in pain in her home city in the late 1970s.

After graduating as a medical doctor, she spent 35 years working in Africa, including a 20-year stint in Uganda.
In 1985, she introduced palliative care into Singapore, which became an accepted form of care in the country.

She then later returned to Africa, initially to Nairobi hospice, before founding Hospice Africa, introducing palliative care to Uganda in 1993. She had brought a formula for affordable oral morphine with her to Kenya and to Uganda, which she had formulated with the pharmacists in Singapore. This was very easy to make at the kitchen sink and cut costs of manufacture. Control of pain has revolutionised the introduction of holistic care necessary to bring patients and families to peace at this special time of life.

Since leaving Singapore in 1990, Merriman has remained a client of Phillip Bates & Co Financial Services.

“The support I have received from Bates & Co has been invaluable,” she said.

“I have had and continue to have ambitious plans for Hospice Africa, and a key factor in me being able to achieve these goals has been the support I’ve received from Alan Mellor and his first-class team.”

Since its inception, Hospice Uganda has successfully treated 28,000 patients; 25,000 of them availed with oral morphine in their own homes.

But it relies on donors to continue its vital work. It costs £1million per year to care for 2,000 patients each month and to continue its Institute education programmes.

“It’s peace of mind for me to know that Bates can manage my finances in a way that allows me to focus on my work in Uganda,” Merriman continued.

“Having them look after my finances in the excellent way they do gives me the confidence to go out to Uganda and help these people.

“It assures me that I can continue to go out and work as a volunteer in Uganda, 23 years on.”

To find out more about Hospice Uganda, visit www.annemerrimanfoundation.com

Markets steady after Trump shock

Fears that the markets would tumble in the aftermath of Donald Trump’s victory in the US Presidential race have so far not materialised.

Like Brexit earlier in the year, forecasts of economic doom and gloom have proven false.

The BBC’s economics editor, Kamal Ahmed went as far as describing the initial hours after Trump sealed victory as “Brexit Minus”. Investors are in “wait and see mode”.

Developments in the last 24 hours have included:

  • FTSE 100 down 2% before rebounding to finish the day positive
  • Minor falls on other European markets as money flowed to safe haven stocks, gold and currencies including the yen
  • A fall in the value of the US $
  • Sharp rises in pharma and healthcare and some industrial stocks.

Alan Mellor said: “You always expect an initial knee jerk reaction, but the response to the Trump victory was much calmer than was the case following the Brexit vote in June.

“Perhaps Brexit changed the way we view so called ‘seismic’ events of this nature. Markets dislike uncertainty and therefore we can probably expect a certain amount of volatility over the coming days and weeks. But the market will quickly revert to the fundamentals – it is only interested in financial analysis and hard economic facts as opposed to whether we like or dislike Donald Trump as an individual.

“My job as a Chartered Financial Planner is about the long-term planning, helping my clients to invest in the right opportunities, the ones with the best track record and the best future potential.”

Alan added: “Although Trump does not get the keys to the White House until after his inauguration in January, we will hear about his plans for his First 100 Days much sooner than that.

“One policy he is likely to pursue is the repatriation of all profits that have been placed by some of the biggest US corporations elsewhere in the world. This cash pile is likely to spark a period of mergers and acquisitions which will be good for the overall health of the economy.”

Regarding the fall in the value of the $, Alan said: “The US $ is over-valued and has been for some time, so the fall we have seen so far is not such a bad thing.

“We will continue to monitor the impact of the Trump victory very closely and ensure that clients are kept updated with any significant developments affecting their investments. Ultimately, our focus is on the long term, not a single, albeit momentous, event in US history.”

Retirement planning software

We are committed to continually investing in our business to ensure the best possible service for our clients.

To this end, we have recently implemented state-of-the-art software which further enhances the firm’s ability to provide clients with the most accurate data to inform their retirement planning.

Alan Mellor said: “The investment in our new cash flow tool will really assist with the long-term planning processes we go through with each of our clients.

“It will allow us to make projections and challenge assumptions as part of the process of plotting out a client’s retirement plan.

“The software is extremely interactive and intuitive in its approach, allowing us to consider historic investment performance as well as looking at likely trends and patterns into the future.

“Ultimately, we want to provide our clients with realistic, attainable long-term planning that will allow them to achieve their goals for retirement.”

To find out more, please contact Alan Mellor on 0151 353 1066.