The ongoing economic crisis is likely to spark a Government rethink on how to recoup costs, James Green of deVere Group, has argued. The last official Budget was presented in October 2021 by Prime Minister Rishi Sunak when he was chancellor.
Since then, Mr Green said, a “series of panicked fiscal statements” have been issued by the Treasury.
However, pensions may soon come back into focus, with millions potentially affected.
Mr Green explained: “The UK is facing at least a decade of lost economic growth amid the readjustment to a post-Brexit era; a weak post-pandemic recovery; a shrinking, ageing and ailing population; a continuing cost of living crisis; and falling productivity and private sector investment.
“As the UK falls to the bottom of the G7 nations in terms of quarterly economic growth, the country’s tax take inevitably falls too. This is of serious concern for UK pension holders.”
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“Using the inflation line, we expect the Government will over time and starting in the Budget, begin to roll out freezes of allowances, benefits and thresholds, and potentially taxes on pension payouts.
“It’s a difficult move politically to go after pensions as the Conservatives typically do well from older voters, but the Treasury needs to bolster the coffers.”
Chancellor Jeremy Hunt has already unveiled a series of further tax threshold freezes in his most recent statement in the Autumn.
The income tax personal allowance, higher rate threshold, main National Insurance threshold and inheritance tax threshold have been frozen for another two years – until April 2028.
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This supersedes Mr Sunak’s plan to freeze these allowances until 2026, an approach he announced during his time as Chancellor.
With pension savers facing a potential hit in March, Mr Green believes these individuals will be looking for ways “to protect their nest eggs”.
As a result, he suggested UK pension holders will increasingly be looking to move their retirement funds overseas.
When retirement funds are transferred overseas into a pension scheme based outside the UK, but that still meets HM Revenue & Customs (HMRC) rules, they are not typically subject to inheritance or income tax in the UK.
Additionally, after paying initial tax on the transfer, Mr Green explained pension holders can often benefit from a much lower tax rate.
It is worth noting this kind of approach will not be suitable for everyone, and some may not be comfortable with this method of saving.
Before any decision is made on one’s pension, Britons are urged to seek financial advice.
These experts are likely to be able to provide tailored assistance to help in individual circumstances.
In addition, people may also be eligible for support from PensionWise, the Government-backed service offering free, independent guidance on pensions.
Mr Hunt has announced the date of the first formal UK Budget since 2021.
The Chancellor is set to deliver his speech in front of the despatch box on March 15, 2023.
It leaves just over nine weeks for Rishi Sunak’s Government to formulate their financial plan.
Many Britons will expect key issues to be addressed in the upcoming Budget, such as the cost of living crisis, price of energy bills and the NHS.