Brown goes for breath of fresh air - but the pension party ends before it began
The pre-Budget report played the green card but the Chancellor dealt a bad hand to financial providers
Sunday 10 December 2006
Much of the colour in this year's pre-Budget report (PBR) came from the catchline that Brown was going green at the expense of blue.
Last Wednesday's decision by Gordon Brown to back environmental issues such as stamp duty relief on "carbon-free" homes was widely seen as encroaching on political territory recently occupied by the Conservatives.
Yet the grey area of pensions policy also contained plenty of interest for the financial services industry and consumers, as the Chancellor moved to clamp down on policies only introduced in April. The backtracking, though, was not on the scale of last year's PBR, when Mr Brown junked plans to allow exotic investments such as art and vintage cars to form part of a self-invested personal pension (Sipp).
His big target was boosting education - £36bn to spend on state schools - and skills levels. But the Chancellor was also criticised for what he didn't say. There was nothing on help for the elderly on low incomes, or any changes to the way in which inheritance tax (IHT) and stamp duty are calculated on property to spare the less well-off from being caught by tax thresholds.
Here's your guide to the key parts of the PBR and what it means for your cash.
A goer for greens
There will be no stamp duty to pay on new properties if they qualify as "zero carbon-emitting" homes.
Although more details are to be released this week, such houses will need to be super-efficient in their energy conservation. This is likely to involve the highest levels of cavity insulation and installation of "green"' energy supplies such as solar panels and mini wind turbines on roofs. Only 200 UK homes currently qualify.
Other carbon-emitting activities were penalised. Air passenger duty, the tax paid by travellers for leaving airports, is to double from 1 February. For low-cost European short-haul flights, it will be £10; on an inter-continental route, up to £80. And after a three-year freeze, petrol duty rose by 1.25p in the litre.
Two policies unveiled in April in a bid to simplify retirement saving look set to be abolished after the Chancellor decided they were not being used appropriately.
The alternatively secured private pension (ASP) - originally planned as an alternative to the compulsory income for life (annuity) once you reach 75 - had been a special concession to a tiny Christian sect. But its adoption by financial advisers for non-religious clients - because the ASP lets you pass on part of your pension pot, though with a 40 per cent IHT charge - prompted an urgent review.
Last week the Chancellor confirmed there will now be a tax penalty of up to 70 per cent on any pot passed on to dependants. This would be punitive enough to put off most people, said advisers upset that a new policy is being pulled out from under their clients' feet.
Mr Brown also looks set to stymie cut-price life cover bought via a pension fund. Under April's rule changes, savers could buy large amounts of cover - known as pension term assurance (PTA) - from their pension provider and earn tax relief on it. However, the Chancellor said the change - taken up by tens of thousands of savers - had "undermined the principles" of pensions reform designed simply to get more people to save than before.
PTA is now to be reviewed but life firms are preparing for the worst. Friends Provident has pulled its PTA cover from the market already and others are weighing up their options. "This is yet another U-turn from a government that doesn't seem to understand the unintended consequen- ces of legislation that came into force only eight months ago," says Jon Briggs of independent financial adviser Hargreaves Lansdown.
Anyone who took advantage of this tax relief before last Wednesday will not be affected. But those whose policies are in the pipeline "will not get tax relief beyond next April", adds Mr Briggs.
Kids are all right
Child benefit will be paid for unborn babies from 2009. It could leave expectant mothers up to £200 better off by the time of their baby's arrival, said Mr Brown.
Mr Brown put the kibosh on the way in which some self-employed workers earn a living via dividends instead of a salary - avoiding income tax and national insurance - through specially set up "managed service companies". Some people have used these arrangements for a short time before going to work somewhere else, making it impossible to work out their proper tax position.
Everyone will now pay income tax and national insurance on dividends from these companies.
- 1 The BBC has just done more to eradicate ‘terrorism’ than all our wars since 9/11
- 2 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 3 Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
- 4 Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village