Following months of speculation, various leaks, and U-turns, this was perhaps the most chaotic Budget I have seen. Made worse when the Office for Budget Responsibility leaked its budget report almost half an hour before chancellor Rachel Reeves’s major announcement.
While the leak may have made Reeves’ Autumn Budget speech seem inconsequential, the impact it will have on your bank balance certainly won’t. Especially if you own a property valued at £2 million or more, drive an electric vehicle, are a saver, and use salary sacrifice for your pensions.
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Reeves has done a fair job when it comes to the most vulnerable, putting a stop to further increases that impact everyday living costs like freezing rail fares for the first time in 30 years and keeping prescription costs to £9.90. And today, she confirmed that the two child benefit cap will be lifted, reducing the risk of child poverty.
Pension cuts
Now for the whinging. Firstly, she has capped salary sacrifice pensions to £2,000.
Pensions are tax-efficient savings vehicles, so I feel taking this sway has perhaps left a bitter taste in the mouths of diligent pension savers.
Reeves has capped salary sacrifice pensions to £2,000 a year from 2029, the amount that can be paid into a pension before National Insurance Contributions (NICs) are payable. Salary sacrifice saves you around 8% on NIC costs and according to Brewin Dolphin, the savings are bigger for employers at 15%.
Taking away from pensions saving to me didn’t feel right, and could deter people from saving into pensions. To me, that is the wrong message - especially as people are barely contributing enough to their pension pots as it is, so will this ultimately lead to the government having to one day bail undersavers out? And will employers reduce other benefits to compensate?
ISA changes
The ISA changes were also a bit disappointing. I do support the need to funnel people into investing where it is right for them.
But Reeves has totally ignored the point that savers are not driven by incentives, and are in fact held back by their lack of understanding.
Limiting cash ISAs to £12,000 for tax year 2027/28 has caused uproar, but let’s remember, the average amount in a cash ISA is around £7,000 HMRC data shows.. So, this is a policy that hasn’t bothered me much.
What does bother me is that this adds another layer of complexity to ISAs and pensions, and is off-putting for would-be investors.
Financial planning
The changes Reeves has announced in today's budget will not hit your pay slip for some years, so now is the time to really think about financial planning.
What impact will the pension changes have on your take home pay and how can you make up for any shortfall?
For cash ISA savers, if you do not invest, now is a good time to understand how it works and consider whether this is right for you.
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Salary sacrifice cap of £2,000 to be introduced in 2029The government says 74% of basic rate taxpayers currently using salary sacrifice will be unaffected by the change
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Salary sacrifice cap of £2,000 to be introduced in 2029
The government says 74% of basic rate taxpayers currently using salary sacrifice will be unaffected by the change
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