Second Budget Syndrome soon to strike

Second Budget Syndrome is unusual when the incumbent party has been re-elected. So there must be some pretty unpalatable and urgent business that cannot be put off until December’s autumn statement or next March.

Top of the list must be details of those £12bn of welfare savings including tax credits.

But the more relevant speculation for readers of this newspaper surrounds pension tax relief.

I was a guest of M&G at Chelsea Flower Show last week and once we had perused the plants we settled to lunch, at which the subject of the Budget inevitably cropped up.

There must be some pretty unpalatable business that cannot be put off until the autumn statement

Everyone I spoke to felt pensions tax relief would finally come under attack. I hasten to add that this was not the view expressed by anyone from M&G, but of their guests – myself included.

If there were to be such a move you can expect outrage from some sections of the press. And they would have a point. Higher rate tax relief is a marvellous perk – and I freely admit it has helped me to build my own pension.

But if there are to be welfare cuts then George Osborne will surely feel he must show that we are still “all in it together”.

What better way to do that than to restrict pension tax relief for higher rate taxpayers?

Estimates suggest this could save £7bn a year. Former pensions minister Steve Webb at one time championed a flat 30 per cent relief.

But cheaper would be a standard 30p in the £1 top-up – which would be equivalent to about 23 per cent tax relief.

It could also be argued that offering such a top-up would be a simpler way to handle the tax relief as well as giving a greater incentive to basic rate taxpayers.

However this Budget will be all about saving money.

I suspect it is far more likely that the higher rate will be chopped altogether. And that could leave pensions looking a very limp investment option for higher earners.

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Happy birthday Fos

Fifteen years of the Financial Ombudsman Service and, I would argue, 15 years of better outcomes for consumers.

Those who moan about Fos should remember what we had before – an alphabetti spaghetti of regulators and ombudsmen that often left the industry as befuddled as consumers.

You might not all like the current system but at least it generally delivers a measure of consistency on the big issues and is understood by those who need it.

Yes, there are areas to be addressed, not least frivolous disputes ignited by claims handlers.

But the current ‘free to consumer’ independent adjudicator is far better than paid-for alternatives such as the awful Abta which handles travel industry complaints.

Let us also consider the big figures. Two-thirds of the 2.8m disputes handled by Fos have related to just three issues: mortgage endowments, bank charges and PPI.

Each was sown, grown and later reaped by the industry, which could have avoided all three debacles had it put its own house in order.

Those mis-selling scandals undermined faith in an industry that is vitally important.

I believe that a strong ombudsman has helped to restore consumer confidence by offering reassurance that if the worst happens there is somewhere they can go for help.

It is an organisation that will offer help and an adjudication in a language they understand rather than in the convoluted and often expensive terms offered by the legal profession.

I am sure Fos will still be with us in another 15 years. You may not like it but I suggest you learn to live with it.

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New body, old name

Libertatem, the new trade association for advisers, says it wants to be a clearer voice for adviser firms.

So why start by picking a name from a dead language? It hardly smacks of forward thinking.

I have argued many times that this sector has not built enough influence.

Often it has spoken with a discordant voice – and good constructive thinking has been ignored by those in parliament.

Perhaps that is not so surprising with so many firms and individuals with differing views.

But where there are issues that unite the industry, it is vital that there are people mandated to put forward those views.

So good luck, Libertatem. I wish you success.

I just wish you had chosen a name that means something to those who did not study Latin at school.