“Such a high profile Budget 'U-Turn' will damage the credibility of the measured and methodological 'spreadsheet Phil’. The former Chancellor, George Osborne, had a reputation as a maverick capable of both an 'omni-shambles' Budget, but also credited with revolutionising retirement with his 2014 surprise pension reforms. Hammond had been positioned as a more considered, consultative successor.
“More broadly, the continual rocky ride of pension tax rules and regulation further cements the need for a separate pension commission. This commission could scrutinise the long-term savings policy landscape and help ensure that any changes dreamt up in a policy silo at the Treasury do not derail other policy initiatives. The real risk is that the Chancellor targets pensions tax relief to make up the shortfall the increase in Class 4 National Insurance would have provided.
“The small increases to the national insurance contributions from the self-employed were supposed to guard the government’s funds against the increasing threat of a growing tax gap. It felt like an attempt to solve an issue that required a much more fundamental review of the distortions provided by the current tax system.
“Greater attention will now be paid to the auto-enrolment review. The self-employed are currently excluded from the private pension system unless they make their own arrangements. The government has already said they are looking to address this imbalance and ensure the self-employed enjoyed a comparable opportunity to save for their retirement. However, this u-turn suggests a ‘pseudo auto-enrolment’ for the self-employed funded through national insurance contributions would be unpalatable so the government may need to explore other avenues.”