With new age-linked ISA rules and major changes to salary sacrifice on the horizon, the Chancellor’s Budget places fresh demands on financial planners. Morningstar Wealth’s Steve Owen says the long lead times offer valuable opportunities to revisit client strategies, but only with careful, proactive advice, as he explains in the following update:
Given the changes to Cash ISA and salary sacrifice announced in The Budget by Chancellor Rachel Reeves today, Steve Owen, Head of Proposition (EMEA), Morningstar Wealth, said: “The government is trying to push more people towards investing, but cutting the cash ISA limit is not the way. Cash has its place in a financial plan and we may now see an increase of cash in stocks and shares ISAs, which isn’t their purpose. Focusing the solution on encouraging higher levels of investment exclusively on those accumulating below the age of 65 bypasses the opportunity for those with larger amassed pots. The age complexity coupled with the definition of ‘Cash’ adds additional layers, and therefore friction for all.
“The changes to Salary Sacrifice are counterintuitive in a country with a looming retirement income crisis. Disincentivising what was the most tax efficient way to save through a workplace pension can only have a negative effect, adding further complexity into an already challenging ecosystem. Advice will be essential to minimise the impact and establish what is now the best way to invest for future income.
“Clients need more help than ever as personal finances become increasingly complex and will be looking to their financial advisers to guide them through these changes and avoid costly mistakes with long-term planning. While these changes can be frustrating and disrupt existing plans, advisers have a great opportunity to demonstrate their value and help clients in these uncertain times.”
“Most of the announcements have a substantial lead time: April 2027 for Cash ISAs, and April 2029 for Salary Sacrifice. This creates good potential planning opportunities, allowing ample time for advisers to check in with clients about what action may be needed.”
