Andy Bell, chief executive of AJ Bell, comments:
“There was a refreshing lack of pensions changes in the Autumn Statement as the Chancellor resisted the lure of the tax relief honey pot. However, it’s clear that the public finances are not in good shape and the £21 billion net spend on pensions tax relief will not have gone unnoticed by the new Chancellor.
“This £21 billion should not be viewed as a cost to the Exchequer but an investment in the future of our country. People not saving enough for their retirement is one of the biggest social crises we face and the Chancellor needs to ensure the investment is commensurate with the reality that private pension savings are still woefully inadequate.
“Now is the ideal time to appoint an independent pensions tax relief commission with the remit to review the levels of private pension savings in the UK and the incentives that encourage those savings. This review should be conducted behind closed doors, rather than in the public glare, and have the freedom to recommend a long term pensions tax relief strategy without being encumbered by short term political pressures.”
Russ Mould, investment director at AJ Bell:
“A projected total spend of around £10 billion on broadband, roads, railways, homes and innovation compares to a UK economy of some £1.8 trillion and as such is unlikely to provide a major lift to the UK economy.
“However, brick makers such as Ibstock and Forterra are likely to welcome the plan to spend £1.4 billion to deliver 40,000 affordable homes, above and beyond the £3 billion housing fund that has already been announced with a plan to “get Britain building”. The focus on affordable homes may be of less use to the large quoted housebuilders as average selling prices tend to be lower here. Property developers like MJ Gleeson, St Modwen and Henry Boot may also benefit as new sites are sought for fresh housing developments.
“Infrastructure plays such as WS Atkins, Kier Hill & Smith, Balfour Beatty and Renew Holdings will doubtless welcome more spend on road and railways although the news has been so well trailered the stocks did little in the wake of the announcement.
“The £2 billion pot for research and development and innovation may fire investor enthusiasm for intellectual property incubators like Imperial Innovations and IP Group, as well as venture capital trusts, as they seek to nurture the tech and biotech winners of tomorrow.
“Shares in telecommunications systems testing expert Spirent are up a fraction on Mr Hammond’s drive to promote the development and roll-out of 5G mobile services, while a £1 billion plan to unlock a ‘gold standard’ of superfast broadband for millions of British homes could bring some comfort to telecoms service providers, if it enables consumers to buy and download more readily. CityFibre’s shares are up by some 4% while Sky, TalkTalk and BT will be watching developments here with interest.
“The biggest movers on the day, however, all look to be losers, in the form of the quoted real estate agents whose income is under attack from the Chancellor’s plan to abolish letting agent fees. Shares in Belvoir Lettings, Foxtons, Countrywide, LSL Property Services and Martinco all found themselves out in the cold, with share price falls in the 6% to 8% range.
“Despite the Chancellor’s decision to increase insurance premium tax shares in major insurers like Admiral, AA and esure look unmoved. Meanwhile Royal Bank of Scotland’s stock drew little succour from the Autumn Statement’s small print, which disclosed that the Government is abandoning plans to sell down its stake in the near term. The shares fell 2.5% to 203p, way below the Government’s 503p a share average purchase price.”
The wider economy
“Back in March, George Osborne only managed to cling on to his target of a £10 billion budget surplus by 2019-20 via financial sleight-of-hand and his successor Philip Hammond has given up the pretence, using Brexit as a ready-made reason. The new Chancellor still wants to reduce the annual deficit but accepts it can only be done more slowly as the economy fails to reach escape velocity, amid doubts over what the result of the EU referendum may mean for the UK’s economy.
“The revised GDP growth and budget deficit figures show just how little room for manoeuvre is available to the Chancellor when it comes to fiscal stimulus. This is something investors should bear in mind given the recent bond market rout and dash within the equity market from defensives and yield plays to cyclical and turnaround stocks.
“We still seem to be trapped in a slow growth environment, where a sudden outburst of inflation is by no means guaranteed owing to the deflationary impact of the national debt, demographics and the price-crushing powers of the internet.”
Tom Selby, senior analyst at AJ Bell: Pensions cold calling ban
The Government should consider radical new measures to build on the pensions cold calling ban confirmed in the Autumn statement today, including:
allowing savers in financial hardship to access their pensions tax-free cash early
a list of permitted investments for SIPPs
Tom Selby comments:
“The pensions cold-calling ban is a great intervention in the battle against scammers and we are looking forward to seeing the detail of the consultation before Christmas. However, more can be done and the cold calling ban must be viewed as the start of a long term drive to defeat pension fraudsters and not the final solution.
“Policymakers must consider radical solutions to tackle the growing threat of pensions fraud. Savers could, for example, be given early access to their tax-free cash where they can demonstrate financial hardship. People are often lured in by scammers when they are in financial distress, so this safety valve could provide a valuable extra option for those who are struggling to make ends meet.
“A list of permitted investments for Self-invested Personal Pensions (SIPPs) could also be reintroduced. This would make it harder for pensions fraudsters to succeed with scams that are based around ‘too good to be true’ investments that are not on the list.
“Many of the victims of scams are elderly and vulnerable, and it is incumbent on Government, regulators and the wider industry to ensure these people are protected.”
Gareth James, head of technical resources at AJ Bell: Reduction in MPAA
“The proposed cut in the MPAA to £4,000 is likely to be relevant to a tiny number of savers and it is difficult to see how the Government is going to raise anywhere near the £70 million a year it anticipates. The consultation document points out that only 3% of individuals aged over 55 make pension contributions of more than £4,000 a year and our experience is that the number of people who have used the pension freedoms that make those kind of contributions is even lower. It will be interesting to see whether the Government proceeds with this proposal once it has heard representation from the industry about the limited impact it is likely to have.”