Financial Planner's Budget 2014 Panel: James Thompson, director, Taylor Patterson
Area of expertise: James offers specialist advice covering areas such as: tax planning, risk profiling, retirement planning, strategic financial planning, investment management and family protection.
1. How do you rate this budget for Financial Planners?
This is the biggest set of changes we have seen in the financial planning industry over the last decade if not longer. The Chancellor has made material changes that will not just affect financial planning strategies but will completely change them. For example, the way an income can be drawn from retirement assets could potentially be reversed as a result of changes announced today.
The budget illustrates that the Chancellor wants to make it easier for people to draw an income from their pension. Previously there have been caps in place, however it is expected these will be relaxed and potentially removed all together. Anything that provokes change is generally positive as it encourages people to seek sound financial advice.
The Chancellor announced that everyone will have access to free financial advice – but what will this mean for the industry and who will it be providing the financial advice? This is an area he did not shed further light on but will undoubtedly provide much debate in the industry.
All in all, it is good news for financial planners as people will need more advice and have the facility to save more due to increased ISA allowances.
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2. What are the positive elements for the FP community?
People will need more advice, especially around taking benefits from their pensions and which option is the most suitable for them. The expansion of tax shelter allowances means financial planners can give advice in these areas and ensure financial planning strategies are as tax efficient as possible.
Raising the higher rate income tax threshold, whilst it is a small rise, is good for those with incomes in excess of £40k per annum. Increasing the income tax personal allowance and higher rate income tax threshold is a sign that this government is starting to consider the middle earners, making it fairer for those with earnings at or around this level.
3. What are the negative elements?
The additional flexibility with pensions may encourage people to look to draw down their pension fund at a quicker rate which could have an impact on business for the financial planner community. It could also lead to individuals drawing their pension down at a rate which is unsustainable, which in turn may lead to financial hardship in the future. We would question whether allowing pensions to be drawn down and spent, without getting suitable advice, is a good idea.
4. Are there 2-3 specific budget changes that you will be following up with your clients?
Most definitely. The top three will be pension funds and the changes to taking pension benefits, extension for the ISA savings limit and the introduction of NS&I Pensioner Bonds.
5. What did George Osborne miss? What should have been in that wasn't?
The Chancellor should have addressed the amalgamation of national insurance and income tax contributions. This would mean that there would only be one tax on your income as national insurance contributions currently act as a hidden tax on earnings.
5. Give the Chancellor your marks out of 10? 1=poor 10=outstanding
As a financial planner I would rate this year's budget at 8/10. Considering we expected the Chancellor to play it safe ahead of the general election next year, he addressed various areas which show the government is recognising they need to help middle earners more.