In the year of Brexit and a shrinking economy due to the current global health pandemic, the most recent UK Government Budget will have a direct impact on your people’s financial situation and confusion around money. Not to mention the changes to benefits it brings and the recent crack down on pay advances and salary loans by the Financial Conduct Authority (FCA).
2020 UK Budget
The day after the UK Budget announcement, we hosted a live broadcast breaking down the key areas of the Budget. Wediscussed how it will affect your people's financial wellbeing, why it will impact you as the employer and what we should all look out for as changes are implemented.
Having read 47,000 words across 179 pages that made up the Budget briefing, we not only looked at the key headlines, but also some of the hidden nuggets that didn’t make the front page of newspapers. That’s what we are all about nudge, helping people distil and understand the complex world of money. So here are the key points from the broadcast:
The one thing that became very clear is the Government are spending big. A £30bn spend was announced to boost the economy and get the country through the coronavirus outbreak. Add to that the announcement of interest rates being cut by half a percent by the Bank of England – it clearly outlined the Government are doing all they can to prevent another financial crisis.
So, what does the 2020 UK Budget mean for the HR during these challenging times?
We’ve grouped the Budget discussion into five key areas: Family, Women, Pensions, Money and Hidden nuggets.
Support for families showed a promising advancements, some key initiatives for HR to take note of:
More than doubling of the annual limit that people can put into junior ISAs and child trust funds. From £4,368 to £9,000 per year.
There was an increase in neo-natal pay and leave for those with new-borns who have an extended stay in neo-natal care. Now up to 12 weeks in paid leave.
A consultation on the design of carers leave. A new in-work entitlement for employees with unpaid carers responsibilities.
The support and additional provisions around gender equality and women in our opinion was meagre, however they included:
Point three of the Family section, a consultation on the design of carers leave will impact females significantly as they are disproportionately the people who take on this responsibility.
The abolition of VAT on women’s sanitary products.
A hidden change: a service improvement to the tax-free childcare scheme to make them more compatible with school payment agents, such as cashless payment apps. Featured in this section because women are more likely to be affected as they disproportionately take on this responsibility.
We see this as meagre because of the continued prominence of the gender pay gap and gender benefits gap. Also the gender advice gap where women are less likely to seek financial advice. It would’ve been great to have seen more focus on this.
Significant changes and more to come in this world, highlights for HR to take note of:
Outside of the Budget, the interest rate cut will have yet another impact on the defined benefit deficits. Companies have had no luck here now for over a decade.
Something the Government didn’t do: There’s an anomaly for those employees who are earning around or below the personal allowance of £12,500. They’re not getting that automatic tax-relief into their pension schemes. The Government had a real opportunity to fix this, but instead launched yet another review giving a very poor message on financial inclusion.
Change to tapered pension allowance: For both measures of income there was an increase of £90,000. For threshold income, which excludes pension contributions, an increase to £200,000. For adjusted income, which includes pension contributions, now starts at £240,000. At the very high end, people earning above £300,000, the amount paid into a pension reduces to £4,000 from £10,000.
Lifetime allowance increased in line with the CPI to £1,073,100.
We can see the Government is definitely taking a firm stand against debt and organisations who manipulate people. This is evident where they have specifically called out something known as the Breathing Space Initiative which is still going ahead. A Government-led initiative focusing on helping people with problem debt.
The National Insurance threshold will increase to £9,500 which should help more than 31 million people by around £100 for the average person.
Interest rate cut: For the average person who has a £150,000 mortgage will save approximately £20 a month as a consequence.
In response to the global health pandemic, temporarily enabling sick pay claims from the first, not the fourth day of sick leave. The guidance has already been issued to employers around this.
A downward age-extension for the national living wage to workers from 21 years old
The Government announced they are bringing forward legislation to allow credit unions to offer a wider range of products and services to their members “to support their vital role in financial inclusion.”
Finally, some hidden nuggets that didn’t make the headlines, but really worth taking note of:
Confirmation on the Access to Cash legislation, whereby the Government is retrenching from a cashless societyand legislating so that the supply and access to cash will remain in force.
Insurance Premium Tax (IPT) review which announced there won’t be yet another increase.
£12.2 billion investment in the Affordable Homes Programme.
There were hundreds of mentions of reviews taking place, which is frustrating for businesses as it makes it harder to plan if you don’t know something is going to change.
Electric cars: A commitment that you will never be more than 30 miles from a charging station. And a commitment to reduce the taxes of zero-emission vehicles.
As you can see just in these key highlights, there was a lot included in the 2020 UK Budget that is going to affect your people and impact you as the employer. If you would like Want even more insight and understanding of the 2020 UK Budget and financial wellbeing – you can listen to the recording of our 30-minute Budget broadcast here.
We recognise that in this current climate there will be even more coming out from the Government to support businesses and individuals in this time. That’s why our team are 100% focussed on breaking down this information and helping people to understand the changes. If you would like more information on the changes Government are putting in place and ways to improve the financial wellbeing of you and your people in this time, sign up here to be added to our mailing list.