We are still only a few weeks into the new administration, yet so much has changed. The full ramifications of last month’s Emergency Budget will take years to be fully understood, but what is clear is that things are going to be different now. The Coalition has made clear that there are no sacred cows, and nothing is safe from the axe.
This sea change in government will obviously impact all of us, some for the better, others for worse. Probably the biggest win for our industry is in pensions. Pensions professionals are rejoicing at the changes to the taxation of higher rate taxpayers. Successful lobbying in this regard has resulted in the dropping of a tax increase that would have cost more for industry to administer than the Treasury would have raised. There are also questions over the timing and scope of auto-enrolment, something that cash-strapped employers will welcome. Similarly, reviews of state pensions and pay are likely to create an environment that makes rewarding private sector employees less costly. And employees are likely to place more value on private healthcare as the NHS comes under increasing pressure.
The Coalition has made it clear that there are no sacred cows, and nothing is safe from the axe
But other changes will create major problems for clients. The removal of the default retirement age, coupled with upward moves in the state retirement age will create real tensions in the workforce. As older, higher paid staff stay on, younger staff will have no career progression to keep them interested and payroll will become stretched. Pressure on HR departments will increase, as will costs on some age-related benefits unless industry solutions are found.
But its not all bad news. Advisers reflecting on the increased demand for their services created by these problems should allow themselves to enjoy a little schadenfreude. One has to take good news where one can get it these days.