Advisers should be working with clients to help them get money into their pensions now before any spring statement changes come into effect, according to this week’s podcast guests.
Appearing on the FTAdviser podcast, Claire Trott, divisional director of retirement and holistic planning at SJP, said the chancellor’s Spring Statement gives advisers something to talk to their clients about, especially in terms of pension saving.
A few weeks ago the Spring Statement was expected to be an uneventful macroeconomic update, but the war in Ukraine and spiralling cost of living meant chancellor of the exchequer Rishi Sunak had to take action.
He did this by raising the threshold from which workers start to pay national insurance by almost £3,000 to £12,570, in line with income tax.
One of the other big announcements that he came out with was that by 2024, he pledged to cut the basic rate of income tax by 1p, from 20p in the pound to 19p.
Trott said these changes make the conversation around salary sacrifice with pensions even stronger.
She said: “If you can legitimately not pay national insurance (on pension contributions) then that saving is significant, and it's even more significant next year.”
Trott added: “There are things that advisers can do to have those conversations and there's timing issues regarding paying pension contributions, even with a 1 per cent change.
"It may seem seem slightly ridiculous that you start thinking ‘actually do we want to get the money in now and get 20 per cent in my pension’ or ‘do I want to get the money in later and get 19 per cent of my pension and get the extra 1 per cent in my pocket in a couple of years time’.”
Also appearing on the podcast, Chris Etherington, private client partner at RSM, pointed out the income tax cut could hit business owners, something which advisers will need to bear in mind.
Etherington said: “This cut isn't quite as straightforward as people might think. There was a bit of more detail behind it. It doesn't apply to everything.
“It applies to earnings and it applies to savings income but doesn't apply to dividend income. So to some extent, we've got a further attack if you like on business owners and how they're going to be able to extract profits from their businesses.”