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What the experts want to see from Jeremy Hunt’s Budget this week

13 March 2023

The chancellor has some key areas that financial commentators would like him to address, including energy bills, pensions and ISA reforms.

By Jonathan Jones,

Editor, Trustnet

Pension reform, the removal of stamp duty on investment trusts and an overhaul of ISAs could all be on the cards in the upcoming Budget this week if financial experts have their say.

Chancellor Jeremy Hunt is due at the dispatch box on Wednesday and faces a number of different issues to deal with, from helping people through the cost-of-living crisis to stimulating growth, pension reform and a rethink on tax.

Below, experts give the measures they most want to see including a streamlined ISA list, big changes to pension limits and help with energy bills.


Perhaps the biggest area of interest in the Budget this week will be pensions. Here, Jon Greer, head of retirement policy at Quilter, said the chancellor needs to get busy with a number of suggested solutions.

First is to scrap the money purchase annual allowance (MPAA), which currently limits the amount someone can save into a pension once they have started to draw from it, down from £40,000 to £4,000.

“Perverse legislation disincentivises people returning to work if they have dipped into their pension,” he said. “The MPAA should be restored to the pre-2017 level of £10,000 per annum. This would alleviate the risk of hitting the MPAA for most people with earnings of less than £100,000.

“However, it might be worth overhauling the rules completely and implementing an approach similar in part to pension commencement lump sum recycling pre-planning condition, which appears to work effectively in practice.”

The government should also look to scrap plans to increase the normal minimum pension age, which is scheduled to increase from 55 to 57 in 2028.


Rethink the Lifetime ISA

Staying with retirement, Greer said the lifetime ISA – which can be used by investors who want to save for a house or put their cash away for retirement – is a “Frankenstein’s monster” of a scheme.

“The LISA attempts to fix two polar opposite problems: saving for a house and saving for retirement, but fails to do either adequately with even its name not alluding properly to either of its main purposes,” he said.

The benefit of the scheme for house buyers is the additional 25% government bonus, but a 25% penalty for early withdrawal not related to either buying a house or retirement penalises investors for saving.

“At the very least the government should only take away the bonus rather than raid people’s savings as well,” he said.

For retirees, it adds “unnecessarily complexity”, he argued. “The reality is we need to get more people to save for their retirements and that is achieved through continuing to evolve successful and transformational policies schemes like automatic enrolment. Adding more products like the LISA muddies the water when effort should be ploughed into the pension.”


Overhauls ISAs altogether

Sarah Coles, head of personal finance at Hargreaves Lansdown, said the chancellor should not just look at LISAs, but the entire ISA system. She suggested streamlining the range of ISAs available to investors, which currently includes cash, stocks and shares, lifetime, help to buy and junior options, among others.

“We need a balance between offering enough choice for people to find an ISA that suits them and providing so many options that it’s difficult to choose,” she said.

Her suggestion is to roll child trust funds into junior ISAs, merge the help to buy ISA with the lifetime ISA and combine innovative finance ISAs with stocks & shares ISAs.

While there are lots of options, savers are hamstrung by the fact they cannot have multiple ISAs – something Coles said was wrong.

They should be able to invest in as many ISAs in a year as they like, she said, which would “iron out needless confusion – such as the fact you can’t currently put money in a help to buy ISA and a separate cash ISA in the same year”.


Abolish the investment trust stamp duty

Directly related to investors, Kevin Doran, managing director of AJ Bell Investments, wants to see the chancellor remove the stamp duty charge on investment trusts, which makes them costlier than funds or exchange-traded funds (ETFs).

The Stamp Duty Reserve Tax applies when investors buy UK shares and is levied at 0.5% of the transaction, but is not charged on other open-ended portfolios.

Doran said: “Funds, ETFs and investment trusts all do a similar job for investors and yet when it comes to stamp duty, only one of these – the good old investment trust – sees investors hit with stamp when they buy the trust itself.

“For the other collective investments, there’s an understanding that fund managers will pay stamp duty on the purchases they make within their funds and so are exempted from this double taxation. In the interest of fair play, it’s about time the playing field was levelled for investment trusts as well.”


Get the economy moving

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said a big part of the Budget could be spent on growing the economy after the chancellor’s “bare bones” plan for growth in January.

“He has said he wants a low-tax economy to incentivise companies to invest, but underlines this can only be done if spending is curtailed, and he seems glued to debt reduction plans. Yet his other goals to improve education and employment will require significant new funding to really move the dial on the issues holding back productivity.”

Another key topic with be how he addresses unions, she said, with many different industries including teachers, nurses and rail workers striking in recent months.

Lastly, he will need to bolster investment and innovation, with many countries around the world investing heavily in future technologies.

“With the EU and the US introducing big subsidy packages for clean tech, Jeremy Hunt will need to step up with fresh new incentives to ensure the UK can take competitive advantage of its leading positions in such fields,” she said.


Energy bills

The cost-of-living crisis will be a big topic in the Budget, with energy prices at the forefront of many people’s minds. Last week, energy secretary Grant Shapps appeared on the Martin Lewis Money Show and indicated that more help could be on the way.

Coles said around half of the population is struggling to pay their bills, with around 6% of accounts in arrears.

“The government has rejected a higher level of support with bills across the board – increasing the energy price guarantee to £3,000 and effectively upping bills by a fifth in April. It has also stopped universal lump sums, which had supported everyone with their bills through the winter,” she said.

“However, more targeted help is clearly needed, and one sensible option would be to introduce a social tariff for those who need it most.”

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