Posted on: 8th April 2022
The 2022 Spring statement has now passed, and we have had time to process what it will mean for savers and investors moving forward. Whilst there was initial confusion on certain aspects following chancellor Rishi Sunak’s delivery of the statement, there was certainly an indication that rough weather was ahead.
Whilst the hard-pressed households were given highlighted support, the reality set in that many would face a financial hammering over the coming years as the UK braces for another tough squeeze similar to the one faced following WWII.
When it comes to savers, there is a concern about how they will be affected by the fiscal measures posed – including the increase in NI thresholds.
The cost-of-living crisis expects to generate around a £1.7bn tax haul for the Treasury as moreover-55s will dip into theirto keep their finances steady.
Household incomes are sure to be squeezed brightly by rising fuel and energy prices, whilst tax receipts from over-55s accessing defined contribution pensions (subject to income tax) to be £400mn higher in 2021/22 than the year previous. This significant revision of the tax taken from people enjoying theirfreedoms comes from greater numbers of older workers turning to their pensions as a way of easing their financial strain over the pandemic and the following cost-of-living crisis.
The 2014 pension reforms provided flexibility for people with defined contribution pensions to withdraw funds from the age of 55 with marginal rate tax being paid. This resulted in many over-50s bringing forward theirplans in the middle of the pandemic and gaining access to their pension pots, with the first 3 quarters of 2021/22 up almost a fifth on the same period a year prior.
With the expected tax take from pension dippers to be £800mn for 2022/23, the outlook is that people will choose to make use of earlier withdrawals to manage the rising costs of living this year, with an increased level of withdrawals than originally assumed. The cost-of-living crisis has expectations of being in effect for several years ahead as people look to their pensions as a solution.
Pensioners received no improvement on the 3.1% increase in the state pension from April onwards – half the current rate of inflation. This leads to a rise in pensioner poverty inevitably.
The Spring Statement also didn’t hold much in the way of surprises for investors, with the updated economic forecasts still sketchy without the full measure of Russia’s Ukraine invasion affecting the economy.
Despite the clouded uncertainty, savers are reminded to stay as calm as possible and not base decisions on short term market movements. Staying updated on market movements with the help of independent financial advisers Manchester is still the best option, and not letting news headlines or uneducated social media comments sway you from the right course of action.
If you have concerns about getting the right pension advice Manchester and how your investments play out following the Spring Statement, contact the team at today.