UK Autumn Statement 2016: what it means for your money

Are you a winner or a loser following Chancellor Philip Hammond’s Autumn Statement? Read on to find out...

Chancellor Philip Hammond has taken to the despatch box and delivered his first Autumn Statement.

And, while he may have scaled back a lot of his predecessor’s austerity plans and pledges, there have not been as many giveaways as the so-called JAMs (Just About Managings) or the Squeezed Middle may have hoped for.

Here’s what it means for you and your money.

Changes to your savings

With interest rates at historic lows, it’s become commonplace for Chancellors to offer savers some sweeteners as often as they can.

But with various ISAs and tax-free savings allowances already in play, there didn’t seem much that Hammond could do within the tight budget constraints.

However, he still had an announcement up his sleeve with news of a new ‘market-leading’ savings account to be launched by National Savings and Investments.

It’s anticipated the account will pay 2.2% over a three-year period on a maximum balance of £3,000 – more details promised in next year’s Budget.

It's worth noting that you can already earn up to 5% with a top-paying current account.

Calum Bennie, savings expert at Scottish Friendly, adds: “The forthcoming savings bond is better than nothing but an interest rate of 2.2% is hardly likely to set the heather alight at a time of increasing inflation.

“This was not a budget for savers. Even with the proposed bond, savers are continuing to get very low returns. Those looking for a home for their money over the long term should continue to consider the growth potential of investing in stocks and shares ISAs.”

An end to pension cold-calling

Last year new pension freedoms were introduced, allowing anyone aged 55 or above to cash in their pension, but this was followed by a wave of fraud that left some savers without a penny of their pension pots.

This will soon be outlawed, with the expectation being that there will be a fine of up to £500,000 for firms who cold-call, meaning only firms with an existing relationship with the pension-saver will be able to contact them.

This development is essential to protect people from persuasive and manipulative scammers; £19 million was stolen through pension fraud last year and it has been estimated that 250 million scam calls made.

Stan Russell, retirement expert at Prudential, says: “The Government should be applauded for cracking down on pension fraud. However, there are simple steps pensioners can take immediately to protect themselves.

"The first is to be wary of any unexpected contact about unusual pension or investment opportunities, and be wary of making any financial decision based on a phone call or email.

“Pensioners should steer clear of offers that appear too good to be true and consult a qualified financial adviser registered with the Financial Conduct Authority if they want to maximise their income in retirement while avoiding fraud.”

State Pension triple lock secure - for now

As expected, the Chancellor confirmed the State Pension triple lock will remain in place until the end of this parliament (2020).

This measure ensures the amount of State Pension people receive rises each year by the highest of inflation, earnings growth or 2.5%.

However, he gave no further commitments beyond that point, leading to speculation from some quarters that it was unlikely to remain beyond that date.

Tom McPhail, head of retirement policy at investment firm Hargreaves Lansdown, says: "The Government could not realistically abolish the Triple Lock within the current Parliament, however the policy has never been sustainable in the long term.

"The Chancellor’s wording today is a strong hint that it won’t be around for much longer."

In addition, former pension minister Ros Altmann tweeted it was "absolutely clear" the lock was unlikely to remain beyond 2020.

Chancellor agrees need to assess pensioner support as longevity rises. Absolutely clear that triple lock unlikely to stay after 2020 #AS2016
— Ros Altmann (@rosaltmann) November 23, 2016

Tax relief cut for those who accessed their pensions

Bad news for those who have already made use of the pension freedoms or plan to do so: the Chancellor announced amount you can save into a pension in a year - will fall from £10,000 to £4,000.

"This means anyone contemplating drawing on their retirement savings needs to be very clear about their future retirement saving plans," says McPhail.

"Taking even £1 in excess of your tax free lump sum, or using the uncrystallised funds pension lump sum rules in your 50s for example could leave savers with only very limited scope to make further pension saving in the future.

"In particular it could deny them the benefit of future employer contributions."

Changes to benefit cuts and caps

Following substantial criticism of the cuts to work allowances for the three million families on Universal Credit, Hammond agreed to take action to support those affected.

It has been estimated that 2.1 million working households would lose around £1,600 a year as a result of changes.

While Hammond stopped short of rolling back those cuts, which had already been voted through parliament, he has agreed to tweak the taper rate, which determines how quickly people lose their benefits once they increase hours at work.

The taper rate will be lowered from 65p to 63p in the pound, which slows the rate at which people in part-time work lose their benefits as they increase their hours.Changes to your taxes

A higher personal tax allowance was top of most people's Autumn Statement wishlist, according to research from credit agency Clearscore, however, there were no rabbits out of hats today.

Instead, Hammond reiterated the government’s plan to raise the tax-free allowance from £11,000 to £11,500 by April and to £12,500 by the end of the parliament.

He also restated his commitment to raising the top threshold to £50,000, but these were all simply confirming is support for George Osborne’s previous announcements.

Corporation tax is to fall to 17% by 2020, as planned previously.

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Letting agent fees scrapped (image: Shutterstock)

Letting agent fees banned

The Chancellor revealed he will be banning letting agent fees, a move that has been celebrated by tenants’ rights organisations.

Currently, tenants face fees of as much as £500 every time they move house and sign a new tenancy, and there have been accusations that letting agents are cashing in on the housing shortage and charging both tenants and landlords for the same services.

However, if you’re in England or Wales and are excited to avoid a big bill next time you move, don’t get too carried away.

While the ban is already in place in Scotland, the rest of the UK will need to wait for a formal consultation to be completed so there is no time scale yet for when the ban will come into force.

Your NHS

The response to our NHS funding article last week showed how strongly readers feel about cuts to the NHS’ budget. Today Hammond revealed there will be £10 billion of additional funding a year by the end of 2020-21.

Driving costs rise... and "fall"

This is becoming something of an Autumn Statement tradition. Fuel Duty is to be frozen for a further year, protecting motorists from any proposed hikes. “In total this saves the average car driver £150 a year, and the average van driver £350 a year,” he commented.

Arguably a price freeze isn't a saving, but it's welcome news nonetheless.

However, Insurance Premium Tax is to increase from 10% to 12% in June next year, which is going to add to the insurance bill for motorists.

Yet Hammond’s speech wasn’t all bad news for car insurance. It’s long been known that fraudulent whiplash injury claims following accidents add around £40 a year to everyone’s premiums and it’s pretty frustrating stuff for honest motorists.

The Chancellor announced there will be a crackdown on fraudulent claims. Sadly, any resulting drop in premiums is likely to be offset by the rise in tax.

Search for cheaper car insurance today

Salary sacrifice sacrificed…

With some notable exemptions (cycle to work scheme, childcare vouchers and pension contributions) the Chancellor pledged to clamp down on salary sacrifice schemes where employers can cut their own National Insurance bills by paying employees in perks rather than cash.

This development has definitely has been criticised by a number of commentators. Jon Greer, pension expert at Old Mutual Wealth, says: “Salary sacrifice has been a virtuous circle for employers.

"They offer their employees discounted benefits like private health insurance and attract good employees. The benefit to them is they don’t have to pay as much national insurance.”

He is concerned that a loss of schemes like private healthcare could increase the burden on the NHS, adding: “Worse still, this could be the beginning of getting rid of salary sacrifice altogether.

"Pension contributions aren’t affected and it is likely the government is concerned about the impact scrapping pension contribution salary-sacrifice will have on auto-enrolment take up.

"But we shouldn’t be too quick to rule out future changes as pensions represent a larger proportion of the lost national insurance contributions.”

Hike to minimum wage

The Chancellor announced he will increase the National Living Wage from £7.20 to £7.50 an hour, as part of the government’s efforts to get it to £9 by 2020. The higher rate will kick in from April next year.

However, living wage campaigners say that it is still far short of a real living wage, estimated as £8.45 across the country and £9.75 in London. That’s a pay rise of around £500 a year for a full-time worker on the minimum salary.

There were also calls for younger workers to be protected too. Guy Stallard, director at KPMG in the UK, says: “It is important that we tackle the issue of low wages for the younger generation too. Low pay blights the prospects of the young and more than two-thirds (72 percent) of 18-21 year olds earn less than the voluntary Living Wage (paid at £8.25 nationally and £9.40 within London).

"This lack of financial freedom means those finishing school and university cannot fly the nest and gain the independence other generations have enjoyed, despite being in employment.”

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Faster broadband

We’ve all experienced the frustration of slow download speeds and it has an impact on business as well. However, that could be set for change with a pledged investment of more than £1 billion in the country’s digital infrastructure to make the UK a “world leader” in 5G.

Boost to the housing market

Many of our readers will have been hoping for changes to stamp duty hikes on investment properties and second homes.

However, announcements relating to the housing market were squarely targeted at lower earners who aspire to own their own properties.

The Chancellor pledged a £1.4 billion fund to boost affordable housing, which should help with the construction of an estimated 40,000 new homes.

The announcement was met with some eye-rolling. Founder and CEO of eMoov.co.uk, Russell Quirk, says: “Mr Hammond must forgive the nation for welcoming this announcement with a degree of scepticism, as like many a Chancellor before him, these words often equate to little more than regurgitated rhetoric and a shortfall of 100,000 new homes a year.

“The Government must realise that these announcements are all well and good but it isn’t the funding that is the issue and, until they address the mechanism itself, little will come of it.

"Where is the land going to come from? How will the planning process be expedited? These are all questions that need answers with actions not just words if the current crisis is to be tackled head on.”

Compare mortgage rates on loveMONEY: see how much you could save

Boost for the regions

Hammond channelled his predecessor for a brief series of pledges relating to the Northern Powerhouse. The English regions are to benefit from a £1.8 billion local growth fund and local authorities will gain new borrowing powers.

Energy bills

No major announcements here but a pledge to keep a close watch on household energy bills to ensure the retail energy market is working for everyone.

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Austerity is not yet over

The Chancellor admitted that the government is no longer seeking a budget surplus by the end of the parliament, instead making a more flexible claim that public finances will return to balance “as soon as practicable”.

However, there could still be trouble ahead and the economic unpicking of this statement is not going to be reassuring reading. The Chancellor says that the Office for Budget Responsibility has upgraded its forecast to 2.1% in 2016 but then downgraded it to 1.4% next year.

If previous Chancellors have overused ‘hard-working families’ then this Chancellor used the word ‘uncertainty’ more than is comfortable.

Wow. OBR forecasts £220bn increase in national debt by end of parliament to staggering £1.945 trillion. Huge Brexit impact
— Robert Peston (@Peston) November 23, 2016

What do you think about today’s statement? Have your say using the comments below.