The economy and business
- UK escapes recession, inflation set to fall to 2.8% but growth revised lower.
- Full expensing to be made permanent, offering relief to business.
- Investors appear underwhelmed. FTSE 100 remains in negative territory and FTSE 250 remains largely unchanged.
- Pound has dipped below $1.25 partly due to the renewed strength of the dollar
Your finances
- Pensioners in line for 8.5% state pension boost with triple lock.
- A consultation on Lifetime Pensions, allowing people to have one pension throughout their working life.
- Changes to ISAs, including new investment opportunities and allowing for multiple ISAs of the same type in each year.
- Natwest share opportunity for investors
- 2 percentage point cut to Class 1 NI rates will be introduced from 6 January.
- This is in addition to cuts to National Insurance for self-employed people
Ruchir Rodrigues, Chief Client and Commercial Officer:
“Retail savers and investors were front and centre of today’s Autumn Statement. The roadmap for ISAs sets out a clear framework for updating and simplifying this much-loved savings and investment product. The announcement on creating a lifetime pension is a significant breakthrough, and the review of the advice boundary is an opportunity to create a giant leap forward in user experience to drive better outcomes.”
Lower growth forecasts overshadow business incentives
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’Given the latest forecasts from the OBR, Houdini Hunt might be able to boast that the UK has narrowly escaped recession, but the economy faces deteriorating growth prospects. The difficulties facing the UK have overshadowed the Chancellor’s giveaways. Inflation is projected to fall to 2.8% by the end of 2024, but the economy will still struggle to bust out of the clutches of stagflation.
The FTSE 100 has remained in negative territory, the energy giants weighed down by a lower oil price and the more domestically focussed FTSE 250 has lost a bit of ground. The pound has dipped below $1.25 as investors assess sluggish forecasts for the economy, and the dollar gains a bit more muscle.
Business support was on the agenda. Making full expensing permanent is the move companies were holding out for, and finally they received the relief they were seeking. This allows firms to set 100% of their capital expenditure off against tax immediately. However, with the UK languishing down at the foot of the global business investment league, trailing other G7 countries, a brand-new architectural plan is needed to encourage more private investment. There was no big bazooka of a solution to significantly increase investment.”
Cash sweeteners for energy projects
Dominic Rowles, lead ESG Analyst, Hargreaves Lansdown:
“The Autumn Statement included some efforts enhance the Government’s patchy record on sustainability. Among the top commitments was an initiative to introduce a cash sweetener of up to £10,000 over 10 years for those living closest to new energy generation and transmission infrastructure, and hopefully speed up planning approvals for new infrastructure projects. The Chancellor also restated his commitment to invest £4.5bn between 2025 and 2030 in strategic manufacturing. Plus there will also be £960m for a new green industries growth accelerator to support clean energy manufacturing including offshore wind, nuclear, Carbon Capture & Storage and hydrogen.”
Boost for state pension and sensible move for personal pensions
Helen Morrissey, head of retirement analysis:
“The Chancellor has confirmed state pension will rise 8.5% in line with the triple lock. For someone on the full new state pension this would see their pension grow from £203.85 to £221.20 per week from April. For someone who hit state pension age before 2016 their full weekly basic state pension would rise from £156.20 to £169.50. Today’s announcement will be greeted with relief by pensioners who have been struggling with the rising cost of living, and will have been unsettled by speculation of a lower rise.
There’s also a consultation on Lifetime Pensions, which will mean that instead of getting a new pension every time you move employer, people will be able to choose a pension provider that they contribute to throughout their working lives. With people moving jobs much more frequently they will be less likely to lose track of pensions from previous employers and having an overarching view of what they have accumulated can help them make more informed retirement decisions.”
ISA reform and boosting retail investment
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“Savers and investors will be delighted the Chancellor has taken the opportunity to pay some much-needed attention to ISAs. Allowing multiple ISAs of the same kind in a single tax year from April, and partial transfers of ISAs opened in the current year are both sensible ways to inject much-needed flexibility and simplicity into the system.
The digitalisation of the reporting system should allow for real time reporting. It will help HMRC to track subscriptions more easily and open the door to multiple ISAs.
It’s disappointing that Jeremy Hunt didn’t take the opportunity to increase the overall ISA allowance. This was last changed way back in 2017, so would need to rise to more than £25,000 just to keep pace with inflation. Similarly, it’s disappointing that Hunt didn’t take the opportunity to make small tweaks to the LISA. It has already helped over 171,000 people onto the property ladder, and helped start saving and investing habits that will boost resilience for a lifetime, but it has the potential to do even more for homebuyers and retirees.”
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
“There are a couple of proposed changes to Innovative Finance ISAs, including expanding them to include Long Term Asset Funds. These offer sophisticated and higher risk investment opportunities in areas like private equity, infrastructure and real estate. These have previously been hard to reach for retail investors, and until now they couldn’t be held within an ISA.
IFISAs will also be extended to include open ended property funds. However, we believe this is not the way to invest in property because of liquidity concerns. We think closed ended funds are a better to get pooled exposure, and these are already available through an ISA.”
NatWest share offer a real opportunity
Susannah Streeter:
“The UK government is considering selling shares it holds in Nat West to retail investors for the first time. It’s a welcome move, given that they were left out of previous sales, which were reserved for institutional investors. The government announced at the Spring Budget that it intended to fully exit the shareholding by 2025-2026.”
National insurance cut – no respite from fiscal drag
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“For those struggling under a massive tax burden, the National Insurance cut will bring real relief. A 2% cut isn’t to be sniffed at. It will take £149 off the tax bill of someone earning £20,000, £349 for someone making £30,000, £549 for someone making £40,000, £749 for someone making £50,000 and £754 for anyone earning over the higher rate tax threshold.
However, by keeping NI and income tax thresholds frozen, the Treasury has done nothing to protect us from the misery of fiscal drag, and means the lion’s share of the damage done to our finances from these tax hikes will still continue to be felt years down the line.”
