“Philip Hammond has already promised to step down as Chancellor before the new Prime Minister, Boris Johnson, has the chance to remove him from the Treasury hot seat.
“Taking over from one of the more high profile Chancellors of recent times, George Osborne, ‘spreadsheet’ Phil as he quickly became known, has been relatively reserved. Early on in his tenure, Hammond was forced to quickly backtrack on proposals to increase national insurance tax for the self-employed, a breach of a key Tory manifesto promise to freeze income tax, VAT and National Insurance. The rapid U-turn forecasted a relatively timid period in office.
“The Chancellor quashed plans for a secondary annuity market. While popular among those that resented what they saw as poor value annuity contracts, Hammond resisted the temptation to pursue a policy which may have gained short term popularity but which presented long-term risk to savers. There is no precedent for the re-sale of guaranteed income products and the government feared there was a significant risk that consumers may be duped into handing over valuable benefits guaranteed for life, in exchange for a lump sum.
“Elsewhere in the pensions market, the outgoing Chancellor also opted to reduce the Money Purchase Annual Allowance. A complex measure, the MPAA is designed to prevent individuals from making pension withdrawals and recycling the cash back into their pension to benefit from additional tax relief. Despite the obvious need to prevent abuse of the system, the reduction down to an annual allowance of just £4,000 once you access a pension can cause problems for some savers. A 55 year old still in work and actively contributing to their pension would trigger the MPAA and reduce their pension funding allowance if they were to withdraw a sum from their pension for a one off cost like helping their children with a wedding, or if they cut their working hours and took some pension income to make up the difference in reduced earnings.
“Regrettably, two key promises have been conspicuous by their absence in recent budgets. The government has made no meaningful progress on addressing the retirement savings gap for the self-employed, a policy which the Treasury and DWP could have been expected to move forward before now. Similarly, while the government has promised more funding for social care, it hasn’t come up with a long-term solution to the funding dilemma. Proposals floated under Theresa May’s leadership were widely condemned and the long-awaited policy green paper is still yet to appear so it will be up to the next Chancellor to address the complex challenges around social care funding.”