OpinionDec 29 2015

Hargreaves Lansdown’s memories of 2015

Search supported by

The doom-mongers predicted financial Armageddon with retirees left destitute after blowing their retirement savings, but were sadly disappointed, as hundreds of thousands of investors took sensible decisions with their savings.

Apparently people who save diligently don’t lose their senses when given the keys to the piggy bank – who knew?

Pension providers were and are divided into those, such as Hargreaves Lansdown, who want to give their clients the choice to exercise the freedoms and those who are seemingly more worried about asset retention.

The sword of Damocles has hung over pension tax relief all year and now looks set to fall next March.

The Summer Budget tweak to pension input periods has created the potential for a double tax year allowance “buy again while stocks last” until April.

Baroness Ros Altmann’s appointment as pensions minister gave the pensions industry cheer and hopefully her previous criticism of the lifetime allowance will lead to its abolition.

Second hand annuities won’t be available in 2016 but the work to create the rules and process will be.

Another April milestone was the ability to transfer child trust funds to Junior Isa. Long overdue.

Financial planning was given a boost with new tax free allowances and a change to dividend taxation to negotiate from April 2016. Inheritance tax planning has become more complex with the family home allowance phasing in from April 2017.

Older savers started the year with the bonus of market beating NS&I 65 Plus Growth Bonds (“pensioner bonds”) attracting over £13bn before closing just after the General Election (the timing a coincidence I am sure).

More generally savers have lost £150bn in interest since the financial crisis.

2016 will see greater scrutiny on cash returns and continued speculation of an interest rate rise, especially as the Fed are expected to go first and before Christmas.

In my view interest rates are unlikely to move during 2016 and if they do it will be at the margins.

Opportunities remain to ensure clients don’t hold too much cash and make the most of what they do hold.

The impact of much higher allowances saw £20bn more going into Isa in the tax year 2014 to 2015 than the year.

However investment into stocks and shares Isas fell.

With less than 20 per cent of the UK population holding a risk asset compared to 60 per cent in the US, more work is needed to promote investment.

The forthcoming increase to stamp duty on investment (and second) property, plus a limiting of tax relief on associated mortgage payments phasing in from 2017 should help.