On 16th March?
In the run-up to Budget announcements there’s always the usual speculations, leaks and rumours on what could headline. The 2016 Budget, scheduled for 16th March, is no different; news about pension tax cuts, further austerity measures and possibly a further flexing of the Chancellors’ promise to recoup the UK deficit by 2020.
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Restructuring the pension tax system
Speculation that there will be a restructuring of the pension system is highly topical news right now, with proposals that George Osborne will look to tax pensions in a similar way to ISA’s, where by pension contributions are taxed on the way into the fund, however are tax free on withdrawal. This is a switch from the current way tax relief is dealt with, whereby contributions receive tax relief, yet income tax is charged when taking funds from the pension, after a 25% tax-free sum.
For pension savers, a new system could mean there is no entirely tax-free element to pension planning.
For the government, this could mean £4 billion back into Treasury funds.
Although this speculation has got everyone a little anxious, it is also considered unlikely that any changes would affect those already in the current pension system.
Possible further cuts
The government are giving their advance warning of potential further cuts which they believe are required during a global economic crisis.
The decline in GDP was more of a concern that expected and highlighted the British economy was “smaller than expected”. Figures now show the cash size of the economy is 1% smaller than anticipated, equating to £18 billion further deficit.
Cuts would likely come from inefficiencies in government spending.
“So we may need to undertake further reductions in spending because this country can only afford what it can afford…” George Osborne
Can the government meet their targets?
Due to the economies uncertainty, there has been further talk about flexing the promises of a £10 billion surplus by 2020.
The Chancellor will no doubt need to communicate any revisions based on updates from the Office for Budget Responsibility (OBR), which leaves the question on the public’s tongue as to whether the target will still be delivered according to their original promise.