In a bold move aimed at incentivising individuals, particularly healthcare professionals, to extend their working years, the UK government announced the abolition of the Pension Lifetime Allowance (LTA) in the 2023 Autumn Statement. Set to take effect from April 6th, 2024, this decision seeks to encourage more people, especially doctors, to remain active in their professions for longer durations.

Abolishing the LTA

The abolition of the LTA is expected to benefit individuals with substantial retirement savings, as well as public sector workers with sizable final salary schemes. However, amidst the anticipation of this policy change, concerns have been raised within the industry regarding the pace of implementation and its potential implications for customer advice and outcomes.

Industry experts have called for clarity and guidance on the new rules and regulations, urging the government to provide further details to facilitate a smoother transition. Some industry leaders have even advocated for delaying the implementation of the abolition until 2025 to ensure a more seamless adjustment period.

Despite the abolition of the LTA, complexities persist within the pension system, including caps on tax-free lump sums and lump sum death benefits, adding layers of intricacy to navigating the new regulations.

Review of State Pensions

In addition to the abolition of the LTA, the government's 2023 Review of State Pensions shed light on the challenges posed by increasing life expectancy and the fiscal sustainability of the State Pension. As the retirement age is set to rise to 67 between 2026 and 2028, questions arise regarding the government's commitment to intergenerational fairness.

The triple lock mechanism, which guarantees State Pension increases by the highest of inflation, average earnings growth, or 2.5%, continues to be a focal point of discussion. Despite criticisms regarding its cost and fairness, both the Conservative and Labour parties have shown reluctance to reform the triple lock agreement, emphasizing the importance of safeguarding pensioners' financial security.

It remains crucial for individuals to stay informed and proactive in managing their pension plans amidst evolving regulations and policies.

Shampa Roy-Mukerjee is an Associate Professor (Economics) and Director of Innovation and Impact, at RDSBL, UEL.

Infrastructure, it seems, has never been more high profile.  Chancellor Philip Hammond announced a spending spree on UK infrastructure in the Autumn Statement, whilst on the other side of the Atlantic, one of the focuses of Donald Trump’s election campaign was a $1 trillion infrastructure spending, with much of this also relying on private financing.

The investment company industry has a thriving Sector Specialist: Infrastructure sector, with foundations both in the UK and internationally.  The closed ended structure provides investors with the purest way of accessing infrastructure projects, by investing in contracts to develop and run long-term capital expenditure projects in public sectors such as transport, healthcare and schools. These contracts are for the long-term (20-50 years) and aim to deliver a stable income over the period of the contract, often linked to inflation.

HICL Infrastructure and International Public Partnerships were trailblazers of the sector, both launched in 2006.  By the end of 2006, the sector had total assets of £550m, compared to £11bn today, making infrastructure the industrys growth story of the decade, and the fourth largest investment company sector.   The AIC has collated views from the Sector Specialist: Infrastructure Sector from both a UK and US perspective.

 Giles Frost, Chief Executive Officer, Amber Infrastructure Group, managers of International Public Partnerships, said: “Never has the word infrastructure been used so frequently as the Chancellor decides that infrastructure spending will be the tool to boost productivity. This is nothing new, but what has changed is the shift away from procuring only big-ticket public infrastructure projects to adopting a more consultative and entrepreneurial approach to plugging the UK’s infrastructure deficit.

“Regions are now set to have increasing spending power to procure bespoke solutions for road, rail and housing projects. This fits with what looks like a social inclusion agenda by central government, seen most clearly in an effort to drive through improvements in broadband connectivity. Decentralising infrastructure spending will allow for more flexibility for private investors to take solutions to local authorities and not simply rely on central government to provide a list of ready-made projects in which to invest.”

Tony Roper, Director, InfraRed Capital Partners, Investment Adviser to HICL Infrastructure, said: “The government is proposing a new pipeline of projects that are suitable for delivery through the PF2 Public Private Partnership scheme. A list of projects to make up the initial pipeline, covering both economic and social infrastructure, will be set out in early 2017. As details become clearer, there might also be potential opportunities in the social housing sector.”

On the US, Tony Roper added: “If the President-elect's policies result in the successful roll-out of new projects requiring private sector capital, particularly in areas like transportation, then London-listed investment companies with a presence in the US will be in a good position to participate in them. Investors are attracted by the segment's stable and differentiated performance with low volatility and strong income generation plus inflation linkage, evidenced historically over 10 years.”

Duncan Ball, Co-CEO of BBGI, managers of BBGI SICAV S.A. said: “President-elect Donald Trump’s proposal for $1 trillion-worth of new infrastructure construction relies heavily on private financing, which bodes well for companies like BBGI that work with governments to deliver and operate important infrastructure. BBGI has 39 separate public-private partnership infrastructure investments and is optimistic about improved deal flow coming from the U.S.A.

“During the election campaign, Mr. Trump made a $1 trillion infrastructure investment over 10 years one of his first priorities as president. He committed to ‘rebuild our highways, bridges, tunnels, airports, schools, hospitals.’”

A critical element of Trump’s plan relies on harnessing the private sector to help finance and build these infrastructure improvements. Duncan Ball, Co-CEO of BBGI, continued: “We envisage an increase in the popularity of the public-private partnership model next year.  BBGI is an investor in East End Crossing Project, a highway public-private partnership project consisting of a new 1,700 foot tunnel, associated road works and a 2,500 foot cable stay bridge across the Ohio River between Kentucky and Indiana, home state of Vice President-elect Mike Pence. We believe this highly successful highway public-private partnership project, which will open to traffic in December 2016, could serve as a role model for more projects in the USA.”

Annabel Brodie-Smith, Communications Director, Association of Investment Companies (AIC) said: “Infrastructure has been the fastest growing investment company sector of the last decade, with the closed ended structure the ideal home for investing in long-term infrastructure projects.  This is because managers have a stable pot of money and are crucially not affected by investor inflows and outflows. Continuing this trend has been the emergence of the Renewable Energy Infrastructure sector after a spate of launches in 2013 and 2014.

“The Sector Specialist: Infrastructure sector is currently trading on around a 14% premium, reflecting the strong demand for alternative income.  Of course investors need to take a long-term approach to investing and premiums can turn to discounts if sentiment changes.”

% share price total return to 31 October 2016

(Source:AIC)

In light of the UK’s Chancellor Philip Hammond’s Autumn Statement today, where he vowed to make the UK economy "resilient" in its exit from the EU, and noted an expected economy of higher borrowing and slower growth, Finance Monthly has heard from several sources who have given their opinions and comments on the Chancellor’s announcements. The comments below range regarding the productivity investment fund, tax free personal allowance, and the new NS&I savings bond, to the fintech sector, economic forecast, IR35 tax legislation, and general funding in infrastructure, R&D and more.

You can read about the key points delivered in Hammond’s Autumn Statement here.

CEO and Co-Founder of MoneyFarm, Giovanni Daprà:

Tax free personal allowance

By raising the tax free personal allowance and higher rate threshold, the government is providing Brits a terrific opportunity to save and invest more money. By 2020 when these changes are in full effect, people earning £30,000 will have close to an additional £300 in their purse each year while those earning £50,000 will be as much as £1,700 better off. Investing this money for the future, as it is earned, is an incredibly easy way to grow wealth over time.

News savings bond

The new savings bond announced today is a reminder from the government that interest rates are low so Brits need to consider an alternative to cash savings. Chancellor Hammond has provided a potential solution in terms of capital preservation – however a 3 year term at 2.2% will tie up money. Some expectations suggest inflation may shoot above the target 2% during that time frame, in which case locking money into this bond may hinder wealth growth.

This is one option but each individual needs to look at their personal circumstance and financial goals to see if a savings bond is a good solution for them. There are other alternatives to cash savings in the investment market, the growth of robo-advice has helped make this more affordable.

Kerim Derhalli, CEO and Founder of invstr:

Much has been made of the recent dip in venture funding within fintech, but we’re simply observing the typical cycle of an innovative environment. The fintech boom has seen rise to many impressive products, but also a large quantity of lower level pretenders who will, naturally, fall by the wayside. Venture capitalists have now reached a point where only the best ideas with real longevity will find funding.

The key for foreign investors looking to invest in the booming UK fintech scene is consistency. By essentially maintaining the status quo in today’s statement, Mr Hammond has gone a way to restoring calmer waters following the tidal wave of concern following Brexit and Donald Trump’s election. The reality is that, despite various forecasts, no one really knows what Brexit means so businesses will look to reduce their own volatility until details emerge.

The City is going to remain the hub of finance and fintech, irrespective of Brexit. The likes of Barclays and HSBC have already said as much. If a fintech start-up wants to succeed it needs to be where it’s at – which is the UK. For now, the outlook doesn’t look too bad.

Markus Kuger, Senior Economist at Dun & Bradstreet:

In the UK government’s first major economic statement since the shock Brexit vote, Chancellor of the Exchequer Phillip Hammond has announced a series of new measures designed to alleviate the economic pressures facing businesses in the UK. Firms looking to combat the continued slowdown of business growth and navigate fluctuating global markets should turn to data as the key to unlocking smart growth and mitigating risks.

A bleak forecast was expected from the UK government, and similarities with the US, following the surprise ascension to power of Donald Trump, won’t go unnoticed in the globalised business world. It’s also important to note that the long-term impact of Brexit is yet to be felt, as Article 50 is only likely to be invoked in Q1 of next year.

With levels of uncertainty remaining very high, Dun & Bradstreet is maintaining its ‘deteriorating’ outlook for the UK’s country risk rating. The two downgrades we have made to the UK’s rating since the referendum make the UK the worst performing economy in 2016, in terms of rating changes. In this light, we remind companies that it’s crucial to carefully assess growth opportunities, while preparing for the far-reaching negative implications of Brexit.

Geoff Smith, Managing Director of Experis UK & Ireland:

In response to the £23bn Productivity Investment Fund

It’s pleasing to see the Government pledge billions of pounds worth of investment into the tech and science sectors in a bid to create more highly-skilled and better-paid jobs. Despite high employment levels in the UK, productivity remains low, part of which is down to the rise in low-paid, low-skilled jobs, following the economic crisis, so it’s encouraging to see the Chancellor attempt to turn things around.

However, if we’re to see an improvement in wages and living conditions, it’s vital that we upskill the tech sector as quickly as possible. Organisations are struggling to find the right talent, and as a result, demand and remuneration for IT professionals continue to grow, with cloud, IT security and mobile skills most in demand, according to our recent Tech Cities Job Watch research.

Upskilling will be vital to success for businesses that want to retain their best talent. By offering the right training and development opportunities, organisations can support their employees in learning the latest skills as these evolve. This needn’t be a complicated or expensive process – a lot of the skills that IT professionals already have are easily transferrable.

To take advantage of the Government’s funding boost, businesses need to think about building their optimum teams for the future.  We work closely with our customers to ensure they have a long-term workforce solution in place when it comes to anticipating what skills will be needed three to five years from now, and the IT know-how required to deliver business success.

In response to the changes to IR35 tax legislation

While HMRC’s intentions to amend existing IR35 legislation in a bid to crack down on tax avoidance should be lauded, we’re concerned about the impact that the change in regulation will have on the IT sector. In an industry where organisations are already struggling to find the right talent, there is a serious risk of ‘brain drain’, whereby projects could be ground to a halt until they find individuals willing and able to work under the new regulations. In fact, we wouldn’t be surprised to see how such a change might encourage existing IT professionals to set their sights abroad to countries courting their talent in a post-Brexit world.

To mitigate against any likely risk, organisations should prepare for these changes now, and also optimise their use of talent for the long term. This can be done in various ways. Firstly, invest in Employed Consultants (ECs) that are permanently employed by recruitment companies and sit outside the scope of the legislation. ECs will be a steady investment for any project, and will offer organisations cost savings and flexibility. Secondly, if developed correctly, Statement of Work projects that clarify deliverables/results, resources, costs, and timelines will help ensure that all Personal Service Company (PSC) work is compliant with IR35 requirements. Finally, consider implementing a Managed Service which will help reduce the time taken to process a high number of contractors, by transferring all the admin and risk to the master vendor.

Lucy-Rose Walker, CEO of Entrepreneurial Spark:

The Chancellor’s pledge to provide an economic environment that drives productivity and supports growth sounds great for entrepreneurs, but we’re keen to see more support for early stage and scale-up businesses in the form of tax relief, access to finance and support for employing and developing people.

On broadband investment

Technology is a great enabler for business growth and here at Entrepreneurial Spark we’re seeing growing momentum across the UK in the technology sector. Investing in broadband will help more internet based businesses to grow, however many of our Chiclets and alumni are facing issues in accessing basic broadband services, so access for all should be prioritised before investment is made into 5G networks. We are currently looking to the future to help entrepreneurs right across the UK through a virtual business growth enablement programme so access to broadband is essential to help us deliver this.

On R&D funding

Investment into R&D is crucial for British firms to compete in a global economy. The commitment of £2 billion per year in tax breaks between now and 2020 for research and development will certainly help, however we’d like to see more done to help start-ups and scale ups access finance to help them grow.

On regional investment

The increased support for economies outside of London will help to strengthen entrepreneurship and economic growth across the UK through schemes such as City Deals and investment into regional transport infrastructure.

On the British Business Bank VC Fund

Unlocking £1bn in finance for growing firms through the British Business Bank as venture capital funding is a great step forward in helping start-up and scale-up businesses to invest in growth.

On Corporation Tax

Sticking to the previously announced tax roadmap is a good move for the Chancellor, reducing corporation tax to 17% by 2020 as previously planned is crucial at this time of uncertainty for British business. We hope this will see continued investment into UK start-ups.

Jake Trask, currency analyst at UKForex:

Sterling fell this afternoon as Philip Hammond announced a raft of measures in an effort to stave off a potential post-Brexit slowdown as we head into 2017.

The pound jumped earlier, as measures to tackle a lack of productivity were announced. However, this good news was tempered by the feeling that the statement didn’t go far enough with regards to infrastructure projects and other measures to promote growth. After an initial snap higher, the pound fell away as investors were left disappointed by the Chancellor’s stimulus package.

Ben Brettell, Senior economist at Hargreaves Lansdown:

We might have a new chancellor but Philip Hammond’s speech today came straight out of the George Osborne playbook.

Like his predecessor he was keen to stress the economic positives in his opening remarks, highlighting that the IMF predicts the UK will be the fastest growing major economy this year, with employment at a record high.

To be fair to Mr Hammond, the economy has proved surprisingly resilient in the wake of the vote to leave the EU. Nevertheless forecasts were unsurprisingly downgraded, to 1.4% next year and 1.7% the year after.

Also predictable were the abandonment of the commitment to eradicate the deficit by 2019/20 and the announcement of a mild fiscal stimulus, focused on housing and infrastructure, and with an emphasis on regional development and improving productivity.

This focus on productivity was welcome, and long overdue. The UK has fallen behind in productivity for too long, though it should be noted that promising to tackle the problem is much easier than finding a solution.

Danny Cox, Chartered financial planner at Hargreaves Lansdown:

We saw from the popularity of the NS&I ‘pensioner’ bonds introduced back in January 2015, how savers are desperate for a better return on their cash. With no end to low interest rates in sight a new bond aiming to pay 2.2% over 3 years and a limit of £3,000 is a decent gesture, but with inflation rising and heading toward 3%, its unlikely money in this new bond savings will do anything but go backwards.

Ray Withers, CEO of Property Frontiers:

This statement was less show-stopping than usual, though not without its moments. Hammond is apparently keener on setting top-level economic policy than laying out specific spending measures, which will sensibly (if less entertainingly) be left for individual departments. His overarching themes included easing pre-referendum austerity commitments, more (and less glamorous) spending on infrastructure and housebuilding, and help for struggling families.

The best way to help working people is simply to fix the economy, and we are hopeful that Hammond's moves on that front will be successful.

More interestingly for those of us in the industry, however, the Chancellor today cemented the place of housebuilding as the cornerstone of Mrs May's refashioned 'working for everyone' economy.

There is important work to be done on that front. 'Just about managing' families are more than twice as likely to rent privately as to own their own homes and the Treasury is clear about its intention to help would-be buyers get a foot on the ladder.

The main pledge today - a £2.3bn fund for 100,000 new homes in high demand areas - is relatively substantial, but even smarter is the focus on infrastructure spending in ways and places that support new development.

An encouraging takeaway from this supposedly final autumn statement is a clear indication that the government understands the need to make the rental sector more affordable in addition to beefing up its traditional focus on housebuilding.

With landlords still reeling from Osborne's final statement, we had been hoping that Hammond's first would also offer them some conciliatory breathing room in this area. A reversal of the recent changes around stamp duty and tax relief on mortgage payments, as a string of industry bodies have called for, was always a long shot and did not happen.

Indeed, the prospect of a silver lining of any kind faded fast with news overnight heralding a now-confirmed ban on lettings fees. The Chancellor in fact targeted landlords specifically with the rebuff: 'landlords appoint letting agents and landlords should meet their fees'.

A ban of this kind is something that has been the subject of debate for some time, and so not altogether surprising. Scottish renters already benefit from something similar, while English households reportedly face average fees of £337 per year. Some of those fees are indeed overinflated, but the key question is: who will eat the cost?

It is not difficult to imagine a farcical parlour game in which the Treasury passes the cost from tenants to agents, who pass it to landlords, who in turn pass it back to tenants. The only part of the chain at no risk of incurring the cost is the Treasury itself, and indeed a subsidy for agents to charge extortionate fees is ridiculous.

But this is indicative of a wider and more worrying misunderstanding in the government's handling of the private rental market: it is largely treated as a zero sum game in which losses for landlords are automatically wins for tenants. That is not the case.

With any luck, the repercussions of this new ban will focus the debate on the balance of pressures affecting every part of the rental supply chain - including landlords. Recent moves giving the Bank of England powers to limit overstretched buy-to-let mortgages, for example, seem like a better way of discouraging the darker side of the rental market than squeezing profits for all landlords.

We wish the Chancellor great success with his new program, and have faith that the pendulum will swing back if the desired corrections to the housing market do underwhelm. In the meantime it is not such a bad time to be a landlord: mortgage rates are at historic lows, and Savills projects rent increases of around 19% across the country in the next five years.

On a more local and self-centred note, we are delighted at the confirmation of a £27m expressway connecting our hometown of Oxford with Cambridge via Milton Keynes. Congestion is probably the main constraint on the UK's twin knowledge economies, and shortened commutes will be a welcome boost to our own staff morale, when it eventually happens.

Charles Owen, Founder of CoInvestor:

Hammond’s announcement to reduce the Money Purchase Annual Allowance is likely to come as a blow to those who currently benefit from double tax relief on their pensions. However, significant tax relief can still be found through investing in alternative assets, such as those under the Enterprise Investment Scheme and Venture Capital Trusts.

It is becoming increasingly important that investors assess how they can diversify their portfolio to protect themselves against economic volatility. Our research has shown that half (48%) of mass affluent Britons who decided to act on pensions freedoms now feel more in control of their own investments and 38% have already benefitted from alternative tax-efficient investments. Considering the decreasing state support and the growing mistrust in pension schemes, we expect this trend to continue as Britons look to take growing their pensions into their own hands.