Emma Wall: Hello and welcome to the Morningstar series, 'Ask the Expert.' I am Emma Wall and here with me today is John Porteous, Head of Proposition for Towry.
Hello John.
John Porteous: Hi Emma.
Wall: So, we're here to talk about the General Election. It's a big unknown. In terms of markets, people are projecting a sort of flat year because of that uncertainty. But what does it really mean for individuals? I mean, what can we expect?
Porteous: Well, I think what we can expect is uncertainty. I think the election is incredibly close. I think speaking to insiders and Westminster I think everybody feels it's far too close to call. And of course, what that means is it's quite difficult to predict what that might mean in terms of a winning manifesto for tax and financial planning at large.
I think what we can see now is there is a basic framework in place for some good, basic, solid financial planning that can take place in this tax year that will set clients up well for the future. I think what is slightly more challenging is trying to predict the exact policies that will prevail and come into being later in the year.
Wall: Looking then perhaps at last year's Budget as a benchmark for the sorts of things that politicians like to talk about, pensions obviously was a big one. I mean, it was a really exciting Budget last year. We can't really expect the same because they can't put things in place or promise things they can't deliver. But is pensions going to be one of those tools politicians use to win us over?
Porteous: Well, I think so. It seems to me that the Government is looking at real empowerment. I think the Pensions Minister has made a great play over allowing people to make really educated choices and obviously, the guidance guarantee sits there to make sure that those choices where possible are used responsibly.
From my point of view, I think that's a fantastic measure but equally I think people need to understand that whilst pensions have been made a little simpler, because actually you have so many choices now, it's the ultimate form of simplification, the retirement discussion at large is now a little bit more complicated.
So, I think one thing are saying to clients is a pension is only part of your retirement thinking. Don't just look at the pension in isolation, look at the broader retirement space.
In terms of pension provision for those still saving, we would be strongly urging people to use the available tax reliefs now in their current form and if people have spare capital and if it is appropriate to their needs to take advantage of past unused pension reliefs prior to the end of this tax year.
Wall: That's because the trajectory so far has been that allowances have been reduced. I mean, lifetime allowances have come down, annual allowances have come down and perhaps that's something that we may see continued into whatever form of government we have next?
Porteous: I think so, but I think it's also quite important from the government's perspective to provide a degree of certainty around pension rules. I remember in 2006 when we saw the first set of changes, the lifetime allowance coming in under the general heading of simplification but yet the number of amendments to pension rules since then have actually been anything but simple.
Eventually when one considers that apart from buying a house this maybe one of the longest-term savings vehicles that one might ever use, it's important that pensions give people a degree of reassurance and certainty and actually the degree of tinkering that you can involve – be that lifetime allowance, be that the tax relief that you apply to contributions going in – I think is very limited if you want people to have confidence in a really, really important vehicle for a future retirement provision.
Wall: So, with all this uncertainty you mentioned there what people can do; a couple of simple measures. Are we talking about things such as maximize your ISA, maximise your SIPP, pay into your workplace pension, simple things people can be doing now to protect themselves against this ongoing tinkering?
Porteous: Well, absolutely. I mean, I think what we would see is do the basics well. Start with fundamentals. So, for many people, as you quite rightly say, look at ISA allowances. They are highly flexible and they are far more generous than they have been in the past; pension reliefs if that is appropriate as well; and of course, we still have some other planning opportunities like utilising ongoing capital gains tax allowances and things of that nature.
I think it depends where you are in the financial planning journey. It's very clear that the Government is trying to appeal to the baby booming generation. There are a lot of politically-motivated measures for the people at or around the point of retirement.
Certainly, from our perspective, we think it's very important in the next term to see incentives for those saving, the next generation, younger generation saving for retirement to complement the flexibility and freedoms provided for those who find themselves at the point of later life now.
Wall: John, thank you very much.
Porteous: My pleasure.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
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