We need clarity from the Chancellor
As we prepare for the Chancellor’s Autumn Statement announcement, few are expecting any significant changes to be unveiled.
Given that we are now in the run up to an election year, this statement has the potential to be a reiteration of successful, if minor impacts on the public’s personal finances, with a reminder that the economy will be fine unless the opposition is allowed to touch it.
This is not to say that there won’t be progress reported for 2014 or changes introduced for next year – it just might require keen attention to detail from observers in order to cut through the rhetoric and understand their impact.
2014 was the year of a raised personal allowance, a crackdown on payday lenders and a raised minimum wage. These might seem like small, even dull changes, but they are steps in the right direction, which will have a sustained impact over the coming months.
What we need is for these achievements to be clearly articulated along with the more complex reforms, so that the public understands what it stands to benefit from (and what it doesn’t).
Unfortunately, the Autumn Statement is often treated as an opportunity to reiterate promises from the Spring Budget announcement rather than to explain its functions and purposes
This year will be no different, as with this Parliament reaching the end of its tenure there’ll be no desire to rock the electorate.
It is for this reason that we must now hold up a magnifying glass to the Autumn Statement and read between the lines – are we really better off than we were six months ago?
What’s changed? And what changes lie in wait?
The first and perhaps most fundamental change both this year and next will be pension reform: March’s most significant announcement was the plan to allow more people to access their pension pots when they want, removing the need to take out an annuity.
Though this will only come into play in 2015, the lack of detail accompanying this announcement is already a concern for many, with the National Association of Pension Funds recently raising concerns with its 101 Questions and Uncertainties as a response to government changes.
If this seems opaque to some, the predicted changes to pension tax relief could add further confusion, as many anticipate the higher rates will be removed to accommodate tax breaks elsewhere.
For some older savers, this might not be the direct solution that they were hoping for.
That said, one aspect of personal finance reform that could benefit pensioners is the cut to the current rate of savings taxation from 10% (for income of up to £2,880) down to 0%.
However, pensioners are likely to be the main benefactors, with others gaining little from the change.
These factors could cast a shadow over the pledge to “a nation of makers, doers and savers” made in March, as bold statements are used to replace detailed explanations of the more complex changes at play.
This unclear approach to personal finance reform is leaving savers – and voters – feeling doubtful, perhaps to some extent undermining the successes of the last year.
What we really need to see from the Chancellor’s announcement is a commitment to clarity. One of this year’s greatest breakthroughs was the disassembling of misleading, untrustworthy payday lending interest deals, so it would be encouraging to see this transparency practised elsewhere.
However, those struggling to wrap their head around the changes to their finances are unlikely to find solace in this week’s statement.
This year might have been a mix of small victories and tough cuts, with more of the same expected in 2015, but if there’s one thing we won’t be getting from this statement, it’s a straight answer.