On 30th October, Chancellor of the Exchequer Rachel Reeves will deliver the Autumn Statement, the first delivered by a Labour government in 14 years. There has been much speculation in the media as to what may or may not be included in that statement, given tax rises on ‘working people’ have been ruled out. This speculation can be unhelpful, as it can cause people to take action in an attempt to mitigate against potential changes, which may or may not come to fruition.
One example is the rumour that tax free cash lump sums from pensions could be reduced. Drawing tax free cash from a pension is an irreversible decision and could lead to individuals being worse off in the long run. Pensions still offer a very tax efficient environment for long term capital and pulling out tax free cash could see the capital left in a savings account, with less long-term growth. Alternatively, if funds are reinvested outside of a pension, future dividends, interest and growth would then be potentially subject to tax, which would not currently be the case within a pension. This is just one example, however.
Whilst legislative changes can alter some aspects of Financial Planning and some may wish to take steps sooner and prior to any potential changes, we cannot second guess what these changes may be. We can only ever work within the legislation that exists at present, planning effectively around this. If legislation does change, then as Financial Planners, we would look to make the best use of the new legislation within clients’ planning too.
A Financial Plan should be reviewed on a regular basis, taking account of changes to not only legislation, but also clients’ circumstances and changes in any short-term and long-term goals. In the same way trying to time investment markets and second guess them often proves futile, the same is true of legislative changes.
We cannot control the outcome of the statement or legislative changes, so worrying about things is not particularly helpful. Instead, focusing on the decisions and actions that can be taken following this, working towards planning goals and objectives (the things that we can control) to deliver the best outcomes, is the best use of time.
We are eagerly awaiting the Autumn Statement, not least as it will put an end to so much speculation. Our next news article will summarise any important changes for our clients.
In the meantime, as the old saying goes, keep calm and carry on!
