Chancellor George Osborne gave a stark warning to younger workers during his Autumn Statement last Thursday, relaying the message that the current pension system is unaffordable and younger Britons must work longer because they will live longer.
This dramatic message underscored the core of Osborne’s Autumn Statement, giving little away while urging people to follow the Government’s lead in trying to “fix the roof while the sun is shining.”
Although current pensioners will receive a basic state pension increase of £2.95 per week beginning in April 2018, pension guarantees were mooted, and the rest of the statement presented a gloomy message.
The economy may be showing signs of growing stronger, but “nothing should be squandered,” Osborne said. However, beneath the layers of rhetoric, Osborne announced a variety of measures that will directly affect the personal finances of UK citizens.
Plans to increase the state retirement age are nothing new, but the plans outlined in last week’s Autumn Statement will accelerate the age increases.
According to Osborne, workers under 50 years of age will give up thousands of pounds in retirement income that they would have previously been able to claim. The majority of people in their 40s will not be able to receive their state pension until they turn 68. Worse yet, workers in their 20s can plan on working until 70 before gaining access to their pension funds.
Income tax allowances
On a bright note, beginning in April 2018, the personal allowance will be increased from £9,440 to £10,000, amounting to an extra £112 for the majority of taxpayers. However, since this was already announced in March of this year, the increase was not greeted with much enthusiasm.
Mike Warburton, of the Grant Thornton accountancy firm, said, “Having reached the Coalition target early, we were hoping he might announce an increase. But as in other aspects, very little was offered of direct benefit to the mainstream of households, who everyone thought this Government was wanting to target.”
Savings and investments
When Osborne reached the topic of savings and investments, disappointment was handed out in spades as Isas were virtually left untouched. Although Osborne did announce certain concessions, they will only be targeted at certain types of investments, particularly Save as You Earn Schemes.
Stamp duty, property, and mortgages
Would-be home buyers were also left disappointed as Osborne announced the Government will not help Britons at the bottom of the ladder by making changes to the stamp duty thresholds.
Instead, Osborne’s speech used statistical data outlining stamp duty gains stretching into 2018. In fact, the Government plans on increasing its stamp duty revenue to £17bn by 2018, a £10bn increase from the stamp duty revenue collected this year.