In the UK's latest Autumn Statement, chancellor Jeremy Hunt unveiled a series of fiscal measures aimed at bolstering the nation's economy.
Central to Hunt’s announcement were significant revisions to pensions, individual savings accounts (ISAs) and national insurance contributions. These changes are poised to impact a broad swath of the population, from pensioners and savers to employees and the self-employed.
Alongside these measures, the statement also included projections on economic growth and inflation, as well as strategic investments in key manufacturing sectors to aid the country's transition to net zero.
Below, Trustnet looks at the key policies that will affect savers, investors and employees in the UK.
Pensions
The chancellor announced the triple lock will remain in place, guaranteeing the increase of the full state pension by 8.5% to £221.20 a week, worth up to £900 more a year, in April 2024.
The triple lock, or the commitment to increase state pensions by whichever is highest of average earnings growth, CPI inflation or 2.5%, was first introduced by the coalition government in the 2011/12 financial year.
Meanwhile, in an effort to simplify the pensions market, the government is looking into allowing individuals to move towards having one pension pot for life and potentially expanding the role of collective defined contribution (CDC) schemes. Eligible pensions under £1,000 could also be consolidated through a multiple default consolidator model.
The industry had been calling for reforms in this space, in particular to help people keep track of the many pension pots potentially accumulated during their working lives and to avoid paying duplicate fees for each invested pension.
ISA reform
Omitted from the speech, but included in the accompanying policy documents, were big changes to individual savings accounts. Savers will be allowed to have multiple subscriptions of the same type of ISA from April next year.
The government will also allow partial transfers between providers during the year and will remove the requirement to reapply for an existing dormant account.
Hunt also expanded what people can invest in. Innovative finance ISAs will be able to include long-term asset funds and open-ended property funds with extended notice periods, while “certain fractional shares” are also expected be eligible for ISA investment subject to further discussions on the implementation of this policy.
Thresholds were maintained at £20,000 for cash and stocks & shares ISAs, £9,000 for a junior ISA and £4,000 for the Lifetime ISA and there was no mention of a hoped-for regime to simplify the amount of choice available. There was also no mention of a British ISA, which would have allowed investors an additional £5,000 allowance specifically for backing UK companies.
Cuts to national insurance for employees and for the self-employed
Employees’ class 1 national insurance contributions (NICs) will fall from 12% to 10%, the chancellor announced in the Autumn Statement. Someone earning the average salary of £35,400 will save over £450 a year in 2024-25.
The combined rate of income tax and NICs for basic rate taxpayers will therefore fall to 30% from 32% – the lowest since the 1980s.
Instead of waiting until the end of the tax year to make these changes, the chancellor will introduce the cuts from 6 January 2024.
For self-employed people, class 2 national insurance contributions (a flat charge of £3.45 a week towards state pension entitlement for people earning profits above £12,570) will be abolished entirely without state pension benefits being affected. This will save the average self-employed person £192 a year and will make NICs far less complicated. Class 4 national insurance contributions will be reduced to 8% from 9% in April.
Economic growth and inflation forecasts
The Office for Budget Responsibility (OBR) figures mentioned during the Autumn Statement put growth at 0.6% in the current year, before rising to 0.7% next year and 1.4% in 2025.
Inflation is also expected to fall, but not as quickly as previously thought. The OBR now expects headline inflation to be 2.8% by the end of 2024, and 2% in 2025.
Other policies
The chancellor announced he intends to fully exit the government’s shareholding in NatWest Group by 2025-2026, subject to supportive market conditions and sales representing value for money, sending shares plummeting.
There were also plans for £4.5bn to spent on “strategic manufacturing sectors” to support the transition to net zero. These include auto, aerospace, life sciences and clean energy.