Budget: Independent financial advisors accuse Chancellor of putting a 'cap on aspiration'

A robust transformation of the pensions system is one of the key objectives announced by Chancellor George Osborne in the Summer Budget, the first under a Conservative Majority Government since 1996.

Looking to further the previous work undertaken in the Coalition, the Chancellor didn’t hold back from committing the Government to massive reforms ahead, confirming a new single tier pension system and new Isa to meet his vision for ‘radical change’.

He said: “Pensions could be treated like Isas – you pay in from taxed income and it’s tax-free when you take it out, and in between it receives a top-up from the government.

“This idea and others like it need careful and public consideration before we take any steps so I am today publishing a green paper that asks questions, invites views and takes care not to pre-judge the answer.”

However, the Chancellor has a long way to go in convincing financial experts that these new measures will have a positive effect, with the deVere Group, the world’s largest independent advisors of specialist global financial solutions, issuing a cold response to the Budget which goes as far as to accuse Osborne of putting a ‘cap on aspiration’.

Founder and chief executive Nigel Green comments: “The tax allowance for high earners is being tapered away to a minimum of £10,000. This move is another bloody nose for those who prudently want to save to be able to achieve their retirement aspirations.

“How can this measure incentivize people to work hard and save to secure their own financial future? Targeting pension tax relief is nothing short of a cap on aspiration to do better, to save more.

“It is another example of how politicians of all parties seemingly believe that pensions are an easy and convenient target to bolster government coffers as and when they need to.”

He continues, “This is short sighted in the extreme. Individuals being financially secure in later life must be being actively supported by the government, not only because it means that people will be best-placed to have the retirement they wish, but it means that they are less likely to be a burden on the State later in life, and this will help ensure the country’s long-term, sustainable economic growth.

“And worryingly, by highlighting that a Green Paper is to be published, the Chancellor is, in my view, hinting that tax relief on pension contributions could go altogether some point in the future.”

Care funding

Although there has been a strong media focus on the issue of pensions, in addition there appears to be growing concern within care sector organisations on the Government’s commitment to care reform.

George McNamara, Alzheimer’s Society’s head of policy, focuses on the ongoing challenges faced by unpaid carers because of issues with accessing professional services.

He says, “The budget was a missed opportunity to recognise the half a million people who are caring day and night for loved ones with dementia. Thousands of people living with the condition rely on their families to support them because they cannot get enough help from health and social care services.

“The government should recognise the contribution of this army of unpaid carers and ensure they receive a decent Carer’s Allowance and access to vital support.”

At the same time, Simon Bottery, director of policy at Independent Age, goes as far as to question the Government’s spending commitments to capping individual care costs, seen as a historic reform of the outgoing Coalition.

He says: “The decision on inheritance tax must raise serious questions about whether the governmen’s flagship social care policy – the £72,000 ‘cap’ on individual’s care costs – will go ahead in April 2016 as planned. This was intended to be paid for in part, by freezing inheritance tax thresholds. The Chancellor needs to clarify urgently whether the measure will proceed since local authorities are already planning for its implementation.”