Autumn Statement 2015 round up

Buy-to-let

From next April, what’s being dubbed the “landlord tax” will apply an additional 3 per cent stamp duty to buy-to-let purchases, softening the foundations of what has been a rock-solid asset class for private investors. The 3 per cent levy for “additional properties” - be they buy-to-let investments or second homes in the country - effectively creates a new top rate of stamp duty of 15 per cent on homes worth more than £1.5m. This number may look large to those outside the capital, but this is the going rate for a multi-let Victorian terraced house in many London boroughs.

Commenters

Adam Challis, head of UK residential research at JLL, said the tax hike would worsen a shortage of properties to rent and could hamper developments that rely on investors, rather than occupiers, buying before properties are built. The stamp duty surcharge will not be applied to companies or funds making “significant” investments in residential property, the Treasury said — or to purchases of caravans or houseboats.

Lucian Cook, UK head of residential research at Savills, said the biggest effect was likely to be on expensive homes in central London, which already faced a stamp duty rise under reforms of the tax last year. “The likelihood is that this will further suppress transactions and prices in the prime central London market, given the extent to which this market has been supported by purchases from second homeowners and investor buyers,” he said. Richard Lambert, chief executive at the National Landlords Association, said the chancellor wanted to “choke off future investment” in private properties to rent, in what he said was “an attack on small private landlords”. Rishi Passi, chief executive of Oblix Capital said: “The UK housing market has been struggling with a chronic supply shortage for years now, artificially inflating prices and pushing homeownership out of reach for many first time buyers, so it comes as a huge relief to see the Chancellor finally put house building policy front and centre of his Autumn Statement. “His life raft for first time buyers includes a proposed injection of £2.3bn of investment for developers building 200,000 ‘starter homes’, with £4bn earmarked to promote the development of 135,000 shared-ownership homes. The detail of how this money will reach developers is yet to be seen, nevertheless this will boost supply and go a long way to moderate the rapid growth of house prices. “A 3% increase in stamp duty for buy to let landlords will prove something of a sting in the tail for developers, and pour water on a private rented market that has been gaining ground in recent years, but overall the Autumn Statement has been a step in the right direction for addressing the most pressing problem points in the UK housing market.”

State Pension

The basic state pension will rise next year by £3.35 to £119.30 per week, the biggest rise in 15 years. The Chancellor claims this will make pensioners £1,125 a year better off. Meanwhile the "triple lock", which ensures the state pension rises in line with whichever is highest out of CPI inflation, RPI inflation or Bank rate, will be maintained. The full rate for people collecting the new state pension from April 2016, will be set at £155.65. The Chancellor says this is a higher rate than means tested benefits for the lowest earners in society.

Commenters

Kate Smith, regulatory strategy manager at Aegon said: “Almost 45 per cent of us see a property as the best retirement investment, followed by a quarter who think it’s a pension. "Today’s news that buy to let properties will incur additional stamp duty will reduce its attractiveness for retirement planning."

Richard Priestley, executive director of retirement income at Canada Life, said: “The move by the chancellor will protect the incomes of pensioners, helping cement the rapid income gains they have enjoyed of late. “In the last 20 years, retired households have seen their incomes climb to record highs, up by 77 per cent in real terms. “This has far outstripped growth seen by the rest of the population. The state pension alone makes up two fifths of a typical household’s income, so this latest move is a boost pensioners will certainly enjoy. Andy Cumming, Head of Advice at Close Brothers Asset Management, said: “The Autumn Statement brought with it surprisingly little pension change, with the Chancellor taking a ‘wait-and-see’ approach following the radical reforms we have seen in the last year. However, while he has stepped in to boost the State Pension, an increase not to be sniffed at by pensioners, the State Pension should not be relied upon as the only source of income. Sustained and sustainable private incomes are increasingly important as a growing population of retirees have an increasingly long retirement. “To achieve this, though, long-term saving is crucial. The Chancellor missed a trick by not taking action to encourage this behaviour. Reduced tax relief for high earners, not to mention a lower lifetime allowance, has penalised long-term pension saving, and reversing these policies would have helped encourage and reward the necessary pension saving to reduce the dependency on the State Pension.”

Pension credits

Pension credit payments will be stopped for people who leave the country for more than one month. At present, pension credit is paid for up to 13 weeks while claimants are temporarily abroad. If they go overseas for medical treatment under the NHS, then it is paid for longer. The same new restriction for those going overseas will also apply to housing benefit.

Commenters

Steven Cameron, Regulatory Strategy Director at Aegon said: “Pension credit is a means tested top-up that those above state pension age can claim if their income is below currently £151 a week (individuals) or £230 per week (couples). There will be few pensioners who can afford to live abroad for extended periods who would be able to claim pension credit so this seems like a reasonable tightening of who can claim means tested benefits.”

Tom McPhail, head of pensions policy at Hargreaves Lansdown, said: "This does mean even a very subtle sleight of hand on the indexation of pension credit and the rate of the new state pension could save the Chancellor a few hundred million pounds." Malcolm McLean, senior consultant at Barnett Waddingham says “The £155.65 per week rate for the starting amount of the new single tier state pension from next April is probably the least it could have been given the increase to the pension credit threshold to £155.60 per week. This is a mere five pence above the minimum income guarantee level and will not preclude an overlap with all means tested benefits as the government had previously implied”

Apprenticeship Levy

Companies will be charged 0.5% of their payroll from April 2017 towards the apprenticeship levy, which will raise roughly £3 billion a year for the following four years. This will fund three million apprenticeships.

Commenters

Dave Lewis, chief executive of Tesco, warned that the apprenticeship levy, in addition to the national living way and business rates is a “potentially lethal cocktail” of costs.

Carolyn Fairbairn, director general of the CBI, said “This was a good spending review for longer-term investment in the economy but there’s a sting in the tail in the size and scope of the apprenticeship levy. Business recognises there are tough choices to be made in balancing the books, but many are reaching a tipping point, where the cumulative burden of the living wage, apprenticeship levy and business rates risk hurting competitiveness.” Simon Walker, director-general of the Institute of Directors, said "We are very concerned by the government's assumption that a quarter of the money collected will be spent on just administering the levy.” Neal Todd, tax partner at Berwin Leighton Paisner law firm, said "It is disappointing to see the government introducing an additional levy on employment when it should be continuing to encourage businesses to come to this country and to employ people in the UK.”

Auto-enrolment

Pension auto-enrolment rate rises are set to be delayed, saving Osborne up to £840million in tax revenue but costing workers an estimated £3 billion in lost cash for retirement.

Commenters

Kate Smith, Regulatory Strategy Manager at Aegon said: “The chancellor’s announcement to delay an increase in the default contribution rate for auto-enrolment will stall the momentum of the initiative and the amount in people’s pension savings pots. For the majority of workers their workplace pension is their main method of saving and auto-enrolment has converted millions into the worthwhile practice of saving for their retirement. Instead of total minimum contributions increasing from 2% to 5% in October 2017, a delay of six months till April 2018 will be imposed. This means many people will be contributing a tiny 2% for the next 2 and a half years. Similarly, an increase in contributions to 8% in October 2018, will now not be implemented until 2019. The delay will impact the full benefit of the auto-enrolment programme. While some employers may view today’s announcement as a great cost saving, other more paternal employers will be keen to get on with the job. For employees, it’s a blow to building up a retirement pot they’d want. Even when at their full level, the minimum auto-enrolment will seldom provide a generous income in retirement. Individuals and employers can of course pay in more voluntarily.”

Stewart Hastie, tax and pensions partner at KPMG, said: “While this may ease the pensions cost burden on employers, this just kicks the can down the road in terms of addressing the UK’s savings gap. It is widely accepted that the UK is simply not saving enough to fund retirement and this decision will essentially take £3billion out of employees’ savings in the next three years.” Richard Parkin, head of retirement at Fidelity International, said: “While changes to the timing of auto-enrolment may look like giving employers and consumers a break, it does appear to raise £820million of additional tax over the Parliament for the Chancellor. We can assume that this comes largely from income tax receipts on the money that would have gone into pensions. As always, what George giveth, he also taketh away.” Steve Webb, Director of Policy at Royal London, said: “It is good news that the rumours of a halt to automatic enrolment have proved unfounded. A six month delay, so that contributions rise in April 2018 and April 2019 may be a good thing. If people get pay rises and income tax cuts in April this will mean that the impact of higher pension contributions on their take-home pay will be reduced. If this leads to lower opt-out rates it would be a welcome change.”

Housebuilding reform

George Osborne has announced plans to build 400,000 new homes, promising 'the biggest housebuilding programme since the 1970s' putting aside £6.9 billion of taxpayers' money to kick-start construction across the UK.

Commenters

Rishi Passi, chief executive of Oblix Capital: “The UK housing market has been struggling with a chronic supply shortage for years now, artificially inflating prices and pushing homeownership out of reach for many first time buyers, so it comes as a huge relief to see the Chancellor finally put house building policy front and centre of his Autumn Statement. His life raft for first time buyers includes a proposed injection of £2.3bn of investment for developers building 200,000 ‘starter homes’, with £4bn earmarked to promote the development of 135,000 shared-ownership homes. The detail of how this money will reach developers is yet to be seen, nevertheless this will boost supply and go a long way to moderate the rapid growth of house prices. A 3% increase in stamp duty for buy to let landlords will prove something of a sting in the tail for developers, and pour water on a private rented market that has been gaining ground in recent years, but overall the Autumn Statement has been a step in the right direction for addressing the most pressing problem points in the UK housing market.”

Henry Woodcock, of IRESS: "The housing market has been crying out for more housebuilding for years in order to boost what is an ever squeezed supply. It is this lack of supply and growing buyer demand which has pushed up house prices, making it even more difficult for first time buyers to take that first step onto the ladder. Today’s announcement is a welcome step towards alleviating this issue however this must be seen as the first and not the last step towards creating a more sustainable housing market.” Nick Sanderson, chief executive of Audley Retirement Villages said: “Today’s announcement of 400,000 new homes is a mark of the Government’s obsession with new builds as the answer to the UK’s housing problem. The policy addresses the symptoms rather than underlying causes of a lack of fluidity in the housing market, most importantly under occupation. Reports show two in five UK homes are under-occupied, of which half are occupied by those aged 50 to 69. Baby boomers are finding themselves stuck in unsuitable housing because of the lack of quality accommodation available. The Government needs to change their policy to consider the whole market and how to provide a greater, more attractive range of choices for older people that in turn will encourage downsizing and free up huge swathes of much-needed family housing.” Michael Conroy Harris, construction expert at law firm Eversheds: “Osborne needs to create incentives for construction, rather than for shareholders. Ultimately, what we really need to see are innovative arrangements where the rewards for speed of construction outweigh the returns from limiting supply to increase demand and returns."

Real-time social listening around the Spending Review 2015: Teamspirit Share / Teamspirit PR

In the immediate aftermath of the Chancellor’s Autumn Statement announcement, Teamspirit Share carried out some social listening analysis to see what the immediate reaction was on Twitter.

 

The reaction to the pension announcements was predominantly neutral, with an unusually high amount of negativity among the public.

 

People seem to be primarily interested and concerned with the increase in the basic state pension and the new single tier pension as this was the biggest pensions announcement today. This topic is driving the highest number of negative conversations.

There was a worry that the increase in pension income was will be followed by a cut in housing benefit for pensioners. Despite the increase in pensioner income, conversations focused the Chancellor’s bias toward today’s pensioners, leaving those saving for retirement uncertain about their future. Another point of anxiety amongst users lies in the fact that people may no longer be able to rely on their Buy-to-Let investment as a credible pension solution because of the extra 3 per cent stamp duty coming into force next year. Pensions tax relief was also a talking point, with people looking ahead to the Budget 2016 for a resolution, while others were relieved to see no changes announced in the Autumn Statement.