Reforming Isas
The rumour mill is in overdrive over possible Isa reforms.
If the chancellor does announce changes here, I expect they’ll focus on encouraging greater investment – perhaps specifically in the UK.
One suggestion is a move to merge cash and stocks and shares Isa, which, while presented as a simplification, is likely to be far from simple or quick to implement.
Another is to increase the annual investment limit, possibly only into stocks and shares, or more controversially into UK stocks and shares.
Allowing more than one Isa per year is also rumoured to be under consideration. To me, the key here is to be realistic about what can be delivered by April without unintended consequences.
We could also see changes to Lifetime Isa rules such as raising the age restrictions, the annual investment limit or the maximum eligible house price.
But I see removing the ‘exit penalty’ to be against the underlying principle of paying an upfront bonus to encourage investing for house purchase or retirement purposes.
The advice/guidance boundary
I’m hopeful the Autumn Statement will also prompt the publication of a joint HM Treasury/Financial Conduct Authority consultation to take forward the holistic review of the advice/guidance boundary.
The FCA has listed aims here as supporting consumers to invest cash, avoiding scams or inappropriate high-risk investments and supporting pension scheme members, including around adequacy of contributions.
These could in various ways support the chancellor’s growth agenda. Ultimately, I hope this will result in a more personalised form of regulated guidance.
Unfinished business
The industry warmly welcomed the surprise announcement in the March Budget of the removal of the pensions lifetime allowance.
While the LTA charge has already been replaced by tax at an individual’s highest marginal rate, the allowance itself is due to be removed from legislation next April.
This is proving fiendishly complex for HMRC, with final rules including new lump sum limits and treatment of some death benefits still to be determined.
I would be delighted if the chancellor took the opportunity to extend the interim arrangements for a year, and while legislating pre-election, make the effective date April 2025.
This would allow all parties – HMRC, providers, schemes, advisers and individuals – to move forward in an orderly manner without unintended consequences.
Steven Cameron is pensions director at Aegon UK
