Overview- Policy changes announced in the Spring Budget are driving client pension contributions, advisers reveal - as Fidelity Adviser Solutions launches its latest IFA DNA report
- Two-fifths (43%) of advisers say clients have increased their pension contributions in the past six months, and 58% expect this trend to continue
- Almost three-quarters (70%) of advisers say the changes announced will have an impact on the advice they provide to clients
London, 3 October: Many advisers expect to have a more significant role in helping clients navigate their retirement options following the Chancellor’s pension changes announced at the Spring Budget in March, findings from Fidelity Adviser Solutions’ latest IFA DNA study reveal.1
Seven out of ten (70%) IFAs say that the changes announced - including the removal of the lifetime allowance (LTA) charge and an increase in the annual, tapered and money purchase annual allowances (MPAA) - will have an impact on the advice they give to clients.
Expected impact of tax and pension changes announced in the Spring Budget
|
Tax and pension changes |
% of advisers who expect changes to impact advice journey |
|---|---|
|
Reduction to the Capital Gains Tax (CGT) allowance |
84% |
|
Removal of LTA charge and increase into Annual Allowance |
72% |
|
Reduction of the additional-rate income tax threshold |
54% |
Over four-fifths (84%) of advisers say the reduction in the Capital Gains Tax allowance (CGT) will have the most significant impact on the advice they give to clients. This is after changes to the CGT annual exemption came into effect in April 2023, having been halved from £12,300 to £6,000. The annual allowance is set to reduce further, to £3,000 in April 2024.
The removal of the LTA charges (72%) and increase of the annual pension allowance limit from £40,000 to £60,000 will also influence the advice provide to clients, say advisers. Meanwhile, the reduction of the additional-rate income tax threshold from £150,000 to £125,140 is expected to have less of an impact on client advice (54%).
Jackie Boylan, Head of Fidelity Adviser Solutions, comments: “The Spring Budget included some of the most significant changes we’ve seen to pensions policy in recent years, presenting many savers with an opportunity to reassess their retirement plans. With so many developments to navigate, advisers have a pivotal role to play in helping them to understand how to maximise their allowances and prepare for the future.”
Pension contributions on the rise
From April 2023, the total amount that workers can accumulate in their pension savings before paying extra tax increased as the changes announced at the Spring Budget came into effect. The surprise removal of the LTA charge had an immediate impact with clients looking to make the most out of their retirement options. Over two-fifths (43%) of advisers report clients increasing pension contributions since the Spring Budget and an even greater number (58%) anticipate clients increasing contributions in the future.
Jackie Boylan continues: “Our latest study suggests advisers are already seeing the impact of the changes introduced following the Spring Budget. With the date of the Autumn Statement now set there may be further developments to prepare for on the horizon - all against a challenging economic backdrop and general election next year.
“When it comes to wider pensions and savings policy - with the automatic enrolment extension bill recently receiving Royal Assent after clearing Parliament - pending changes will likely be significant. Questions will continue to be asked about the future of the triple lock and the Pensions Bill - and we expect to know more following the King’s Speech at the State Opening of Parliament in early November. Clients will rely upon advisers to help them navigate through possible changes and keep their own retirement goals in sight.”
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