Budget 2017: two things you might have missed and two changes that didn't happen
Wednesday's (8 March) Budget had few surprise rabbits, as chancellor Philip Hammond lived up to his nickname of 'spreadsheet Phil'.
Nonetheless it included a number of very relevant changes you might have missed this time around.
PERSONAL ALLOWANCE INCREASE
The chancellor reaffirmed the government's plans to increase the personal tax allowance to £12,500 by the end of this parliament.
As previously announced, workers will see their personal tax allowance rise to £11,500 from 6 April 2017, and the allowance will reach £12,500 by the 2019/20 tax year. Earnings below this amount are exempt from income tax.
In addition, the 40 per cent tax threshold will be increased. From April 2017 only those with an income of more than £45,000 will be subject to a 40 per cent marginal rate of income tax.
MONEY PURCHASE ANNUAL ALLOWANCE DECREASE
Further, the Money Purchase Annual Allowance (MPAA) will be reduced from £10,000 to £4,000 per annum. The MPAA restricts the payments which can be made to a pension when an individual has 'flexibly accessed' their benefits.
'The government is concerned there are significant sums being lost to the exchequer through recycling. However there is little in the way of research or statistics to back that up,' argues Andrew Tully, pensions technical director at Retirement Advantage.
Tom Selby, senior analyst at AJ Bell, comments: 'It's disappointing the Money Purchase Annual Allowance remains on the chopping board. The cut flies in the face of the pension freedoms.
'People are being encouraged to use their savings flexibly and yet when they do so they are punished with a drop in their annual allowance from £40,000 to £4,000. This will affect large chunks of middle Britain, many of whom might need to catch up for the years when they have failed to save enough for retirement.'
Les Cameron, head of technical at Prudential, says: 'The government is concerned about abuse of the tax system, however the proposed reduction to the MPAA may see many ordinary savers who have accessed their pensions caught by the new limit.'
NO CHANGES TO ANNUAL ALLOWANCE
Some commentators had expected changes to the annual allowance - but these did not materialise. The annual allowance is the limit on the amount a person can contribute to their pension each year, while still receiving tax relief. It is currently capped at £40,000.
Saga director Paul Green comments: 'The fact that the chancellor did not take the opportunity to simplify pensions could well put more people off saving for their pension. Pension saving lifetime and annual limits are complex and deter people from saving for their retirement, and we feel this regulation should have been abolished in the Budget.'
Kay Ingram, director of public policy at LEBC Group, agrees. 'The imposition of both an annual and lifetime allowance makes pension saving harder, as these taxes are highly technical in their application and can come as a surprise to those saving for retirement, especially if they seek to do so without professional advice.
'It would be easier and fairer if either one allowance or the other applied to pension savings, but not both. The annual allowance restricts the ability of higher earners to save for retirement. It is no longer confined in its impact to those on bankers' salaries and bonuses.
'In the past couple of years we have seen more and more public sector workers caught by this restriction especially those with long service in the NHS, Fire or Police services and senior teachers.
'It is time that either the annual allowance was scrapped, with only the lifetime allowance putting a total cap on tax relieved pensions, or all taxpayers were given the standard £40,000 per annum allowance, with no lifetime allowance test also being applied.'
Jason Hollands, managing director at Tilney, says: 'There was no major overhaul of pension tax reliefs, as some had feared. Indeed there was no meddling at all with either the pension lifetime allowance, which had been cut slice by slice by George Osborne down from £1.8 million to £1 million, or indeed the annual allowance.
'In one sense that is a huge relief, but it also represents a missed opportunity... to end the uncertainty once and for all by getting a system in place that is simple, fair and will be durable for the long term.'
NO SOCIAL CARE ISA
Former pension minister Ros Altmann recently told Money Observer she expected there to be something in the Budget to help people save for social care, such as a social care Isa.
She said: 'I would love to see the chancellor announce a special savings incentive to help people understand the need to save for care costs in later life, as well as incentivising them to earmark some of their existing savings for that purpose.
'If the chancellor wants to signal the need for this, he could for example announce that an Isa that is specifically earmarked for care needs can be passed on free of inheritance tax if not used for care - this would be up to a particular limit per person.'
Other pension experts have also argued that such an incentive would be helpful. It remains to be seen whether further changes to pension allowances and social care are off the cards for the remainder of this parliament, or if they might resurface in the Autumn Budget.