Budget reactions from Howden Employee Benefits & Wellbeing

Budget reactions

In response to the budget, Paul White, head of technical for Howden Employee Benefits & Wellbeing, Emma Hadley, head of pensions at Howden Employee Benefits & Wellbeing, and Saba Haran, Employee Benefits Director, Scotland shared their insights on key aspects.

National Insurance reduction: promoting work and financial stability.

Regarding National Insurance, Emma Hadley highlighted the 2% reduction in National Insurance Contributions as the headline for the workplace. The Chancellor stated this move was intended to promote growth and "make work pay" while safeguarding funding for public services.

The NIC reduction will see employees now pay 8% of their earnings between £12,570 and £50,270, compared to the previous rate of 10% and before that 12%.

It means that an average worker on £35,400 will receive a tax cut of over £450. Having more take home pay could of course help people with cost-of-living challenges or prompt some to increase their pension contributions.

However, Emma cautioned that tax thresholds being frozen until 2028, will mean more individuals fall into the higher rate tax bracket as inflationary pay increases take their pay above the upper threshold.

Saba Haran emphasised that the reduction in NIC would make a notable difference to many employees, particularly in Scotland, potentially improving their financial stability and enabling greater flexibility in budgeting and saving.

Pension Policy Changes: Abolishing Lifetime Allowance and Flexibility for Savers

In pensions, Emma Hadley noted the confirmation of the abolition of the Lifetime Allowance from April. However, whilst the lifetime allowance is abolished, new allowances such as the lump sum allowance and the death benefit allowance have been introduced, each limiting the tax-free benefits that can be paid.

She also said discussions around the 'Pot for Life' proposals, which aims to provide savers with flexibility by allowing them to maintain a single pension pot throughout their lifetime, are very much ongoing.

Investment Focus and NHS Productivity

Paul White emphasised the Chancellor's focus on investment in the UK, particularly with the intention to introduce a reporting regime for pension schemes to disclose their allocations to UK equities. This move aims to encourage investment in the UK economy and ensure transparency.

He also noted that keeping people in work, healthy and more productive were overarching themes of the budget. For example, £3.4 billion of new investment in NHS digitisation was announced, aimed at improving healthcare delivery and streamlining operations. As a result, people who will benefit from reduced waiting times and faster healthcare services.

Also, while there wasn’t any direct support for employers was mentioned, it is important to note that in the background things are happening. An Occupational Health Taskforce led by Dame Carol Black has been set up to tackle in-work sickness and drive down inactivity, supported by the Occupational Health Innovation Fund and sick pay is under review too.

Also, while budget didn’t bring anything particularly exciting for employers, it could be a good thing because the industry is still getting to grips with the huge raft of changes introduced in the Autumn statement.