Autumn Statement: Financial Services are not the headline but changes still happening

For most of the Chancellor’s speech, the financial services industry could slumber along. A burst of activity late in the piece may shake some awake however. Closer examination reveals more food for thought and a couple of tangible announcements, but overall answers to key questions were postponed, rather than delivered.  

  • First, the announcements we do know. Another £1bn crackdown on insurance fraud, chasing the {ambulance} chasers who profit from whiplash claims
  • Secondly, changes to the timing of pensions auto-enrolment. Increases in contribution rates delayed to coincide with tax years – the result, a near £1bn saving over a two year period
  • Third, confirmed increases to the existing and soon to be introduced new state pension (now subject to a Select Committee enquiry)
  • Fourthly, the big one: measures to dampen the second home and buy-to-let markets and by extension cool the housing market overall. A 3% surcharge on these transactions and an undoubted effect on demand for these types of mortgages from lenders

Then the stuff that we didn’t hear: confirmation of pooling of local government pension funds into British Wealth Funds, followed by the terms to do it. Active fund managers still look to be welcome at the party, but their case will need to be heavily proven.

And confirmation of the appetite to save in different ways. The Innovative Finance ISA extended to debt securities offered via crowdfunding platforms and maybe equity crowdfunding too.

But what of those unanswered questions? Nothing on pensions tax relief until Budget 2016; nothing on the secondary annuities market until December; and nothing about planned changes to the bank levy from 2021, save for a promise of a consultation to come.

So big questions remain, but big assumptions are also being taken based on today’s announcements. Two projections to take away from the book of numbers (page 136 if you’re interested):

  1. A rebuilding of the savings ratio: year-on-year change of only 4.1% this year, but climbing back up to 4.7% by 2020
  2. A cooling housing sector: year-on-year growth down from 9.9% in 2014 to just 4.3% in 2020

Saving more, relying on property less for retirement. That’s the undertone here. Even if auto-enrolment contribution increases are delayed a bit to help balance the books.

Henry Groundes-Peace

Hill & Knowlton Strategies Search