Chancellor Jeremy Hunt has delivered his second Autumn Statement, containing a raft of measures – 110 in total – many of which will affect advisers and their clients.
Despite traditionally being the less eventful fiscal event of the year, Hunt nevertheless wielded the axe on national insurance contributions while handing out more generous pension benefits than some had anticipated.
Amid a raging cost of living crisis, albeit with much lower inflation than at his last fiscal statement in March, the chancellor set out a raft of measures, including reforms of national insurance for the self-employed and employed, and a shake-up of the Isa rules.
This comes against an economic backdrop in which inflation remains five times higher than previously forecast by the Office for Budget Responsibility and economic growth is lagging, though as the chancellor was quick to point out, it is still higher than many other European nations' GDP figures.
The OBR says the measures contained in the Autumn Statement will help lower inflation next year, it has already halved since this government took office, from 11.1 per cent to 4.6 per cent, in line with Prime Minister Rishi Sunak's central pledges.
Meanwhile the government states its policies are forecast to increase the economy’s potential output in the medium term by 0.3 per cent.
So, here is what advisers need to know about the Autumn Statement.
State pension
Contrary to what some people had expected, the chancellor has opted to uprate the state pension in line with September's wage growth figure of 8.5 per cent, as opposed to a lower amount which could have smoothed out the effect of high public sector bonuses in July.
The ‘new’ state pension will increase from £203.85 per week to £221.20 per week (£11,502.40 per year), while the ‘old’ state pension (paid to those who reached state pension age before April 2016) will increase from £156.20 per week to £169.50 per week (£8,814 per year).
“This is one of the largest ever cash increases to the state pension, showing a Conservative government will always back our pensioners,” Hunt said in his speech.
Tom Selby, head of retirement policy at AJ Bell, says: “With CPI inflation now at 4.6 per cent and anticipated to continue falling into 2024, today’s announcement represents a serious boost in spending power for millions of pensioners.”
But Kevan Ramanauckis, pensions technical specialist at Canada Life, warns while the "inflation-proof increase" is welcome, someone in receipt of a full state pension will now be just £1,000 away from paying income tax, even if they have no other source of income.
“Pensioners in the old state pension scheme and even some in the new system may find themselves being drawn into the income tax net for the first time,” he says.
According to Canada Life, for every 1 per cent increase in the state pension, the government will need to find around £900mn a year to pay for it.
