A short story about value

You may have heard a story about Henry Ford calling in a famous engineer to fix a broken generator. After days of failed attempts by others, the expert reportedly made a single chalk mark, the problem was fixed, and he later billed mostly for “knowing where to put it.”

The story is almost certainly apocryphal. But its message is timeless.

The real point isn’t about chalk marks or factories. It’s about value.

Expertise isn’t measured by the minutes you see. It’s measured by the years of learning, experience, mistakes, and judgement that make the right decision possible at the right time.

In financial planning, much of our work looks simple on the surface: a recommendation, a strategy, a change to a portfolio. What you’re really paying for is the thinking behind it, the risks avoided, and the costly mistakes you never have to make.

You're not paying an expert for their time. You're paying for all the time you don't have to waste.

You’re also paying for clarity, perspective, and confidence.

Anyone can make a mark.

Not everyone knows where to put it.

With very best wishes,

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

The 67% tax car crash nobody ordered

The following is an article by Andy Bell in today’s Money Marketing:

“There are policy missteps and then there’s this — a wheezing, exhaust-belching car wreck of an idea being pushed uphill by a government too proud to admit the handbrake’s still on.

The plan to drag unspent pensions into the inheritance tax (IHT) net isn’t about fairness or simplicity or revenue. It’s about not looking weak. About avoiding yet another headline screaming “U-turn!”, as if that’s somehow worse than wrecking one of the few bits of the tax system that vaguely works.

In its apparent quest to make life as difficult as possible for financial advisers, bereaved families and anyone with a pension, the Labour government is hellbent on bulldozing through this change. Not because it’s a good idea. Not because it’s workable. But because they’re terrified of appearing indecisive.

Let’s recap. Back in April, chancellor Rachel Reeves — without any hint of consultation — announced that from 2027, unspent pensions will be subject to IHT. Further, if the deceased dies age 75 or over, the recipient will also pay income tax on the proceeds. An effective tax rate of 54%, 64% and 67% for basic, higher and additional rate tax payers.

Cue annoyance and a hint of panic among advisers, clients, providers and anyone with a functioning frontal lobe.

The original plan, drawn up on the back of a fag packet in some Treasury broom cupboard, made pension providers responsible for paying the tax. That’s right — companies with no control over probate delays were going to be on the hook for late interest payments. It was like fining the RAC because you got stuck in traffic.

Realising this was borderline insane, HMRC has now decided to dump the admin disaster on grieving families instead. Sensible? Slightly. Cruel? Definitely. And still an utter mess.

So, we now face a future where families navigating death and grief must also decipher the UK’s most baffling tax code, with the added pressure of impossible deadlines. All for what? A £1-2bn tax raid on the money someone responsibly saved for decades. In a pension. Encouraged by the same government machine now eyeing it up like a butcher sizing up a prize pig.

And here’s the thing: no one is saying pensions shouldn’t be taxed on death. There aren’t pension scheme administrators parked outside Parliament in tractors honking their horns. The industry has stayed calm and constructive. TISA, AJ Bell, and others have offered perfectly sensible alternatives that would still net the Treasury its cash, but without turning probate into a game of bureaucratic whack-a-mole.

One option: scrap the ludicrous “age 75” rule and just tax beneficiaries at their income tax rate, with a tax-free allowance. Simple, familiar and actually fair. Most people understand income tax. Nobody understands IHT, not even HMRC half the time.

Another: reheat the old pre-2015 system with a flat-rate charge — 25% to 35% — and a decent tax-free amount. Yes, it retains the age 75 line, so it’s not as clean, but it’s still a better meal than what we’re being force-fed here. It’s at least palatable, whereas the current proposal is all bones and gristle.

Instead, Reeves and co are pressing on like a learner driver in a fog of bad advice, too proud to hit the brakes. Because apparently, nothing scares this government more than the word “U-turn”. Not economic damage. Not grieving families. Not chaos for advisers. Just the optics.

If this is political courage, I’m a vegan yoga instructor with a fondness for spreadsheets.

Here’s a thought: if the opposition had any clue, they’d rip this to shreds. It’s a political own goal the size of an aircraft hangar. The sort of policymaking that makes you nostalgic for potholes, bin strikes and the days when tax changes came with a press release that wasn’t written in invisible ink.

Tax pensions on death? Fine. But do it properly. Do it transparently. And for heaven’s sake, do it in a way that doesn’t kneecap the people you’re meant to be helping.

Until then, we’re left with an unholy mess made of pride, panic and political cowardice. And guess who’ll be left sweeping it up.”

Andy Bell is co-founder of AJ Bell

I think that sums it up nicely!

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

With very best wishes,
Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Why Holding Cash Is Costing Britain Its Future

For millions of people across the UK, “playing it safe” means keeping their money in cash. It feels sensible. It feels secure. And in uncertain times, it feels comforting.

But the uncomfortable truth is this: over the long term, cash quietly makes you poorer.

New research from Scottish Friendly reveals just how widespread this problem has become.

The survey found that 42% of adults keep all their wealth in cash, with another 15% holding most of it there.

That means well over half of adults are largely opting out of investing altogether.

Even more striking, 72% admit they know this could leave them worse off in the long run.

So why do it?

The main reasons are emotional, not rational:

• Quick access to money – 39%

• Fear of losses – 38%

• Distrust of markets – 34%

In other words, people understand the risks of cash. But fear is winning.

What the Numbers Really Show

The chart below tells the story more clearly than words ever could. It compares:

• A balanced investment portfolio (blue)

• Cash (green)

• Inflation, measured by CPI (flat orange line, set as the baseline)

Inflation is shown as flat because all figures are measured relative to it. Anything below that line is losing purchasing power.

Look closely at what happens over time, 20 years in this example.

The blue line — representing a diversified, balanced portfolio — rises steadily, despite short-term dips. It reflects growth that comfortably outpaces inflation.

The green line — cash — drifts downward.

That is inflation at work.

Even when cash “feels” safe, it is quietly being eroded. Every year, your money buys a little less. Over decades, that erosion becomes devastating.

This is the hidden cost of caution.

The Illusion of Safety

Kevin Brown, savings specialist at Scottish Friendly, describes the problem perfectly:

“People in the main understand the risks of keeping their savings in cash over the long term but they nonetheless cannot make the leap to invest… The result is they are making themselves poorer.”

This is what he calls the “mental gymnastics” of savers.

We tell ourselves:

• “At least it’s safe.”

• “I can access it anytime.”

• “I don’t want to lose money.”

But inflation means you are losing money anyway — just slowly and silently.

It doesn’t show up as a headline loss.
It doesn’t trigger panic.
It just eats away at your future.

Who Is Most Affected?

The research also reveals stark generational differences.

• 56% of Baby Boomers hold all their wealth in cash

• 44% of Gen X

• 25% of Millennials

• 21% of Gen Z

Older generations are the most cautious — and the most exposed to inflation risk.

Distrust of markets is highest among Boomers (40%), compared with just 23% of Gen Z.

Fear of losses is also more pronounced among women (44% vs 33% of men).

Millennials, interestingly, are the most likely to “half-step” — investing some money, but still keeping most in cash (18%).

Across all groups, the same theme emerges: fear outweighs evidence.

Investing Isn’t Reckless — It’s Responsible

One of the biggest misconceptions is that investing equals gambling.

It doesn’t.

Proper investing means:

• Diversifying your money

• Spreading risk

• Staying invested for the long term

• Accepting short-term ups and downs for long-term gain

As the chart shows, markets fluctuate. There are dips. Sometimes sharp ones.

But over time, well-constructed portfolios have consistently beaten inflation.

Cash, on the other hand, almost never does.

So the real gamble is not investing.

The real risk is standing still while prices rise.

The Wider Cost to Britain

This isn’t just a personal issue. It affects the entire economy.

When millions of people keep their wealth in cash:

• UK businesses struggle to access capital

• Innovation slows

• Growth is stifled

• Productivity suffers

As Brown warns:

“This also affects the economy, leaving domestic companies short of the capital they need to grow.”

A nation that only saves cannot thrive.
A nation that invests builds its future.

A Better Way Forward

You don’t have to choose between recklessness and stagnation.

There is a middle ground:

• Keep an emergency fund in cash

• Invest the rest sensibly

• Use ISAs and pensions tax-efficiently

• Review regularly

• Stay disciplined

This approach gives you:

• Security today

• Growth tomorrow

• Dignity in retirement

You keep liquidity for short-term needs, while allowing the rest of your money to work for you.

The Bottom Line

Millions of Britons know inflation erodes cash.
Millions keep doing it anyway.

Not because it’s logical.
Because it feels safe.

But as the evidence shows, cash is often the slowest way to lose money.

Investing — done properly — isn’t about chasing quick wins. It’s about protecting your future purchasing power, building resilience, and giving yourself options later in life.

Or, as Kevin Brown puts it:

“Reluctance to invest is not just caution but a deep-rooted fear.”

Overcoming that fear isn’t reckless.

It’s responsible.

And for most people, it’s the single most important financial step they’ll ever take.

Follow the link to this short video by Martin Lewis, it’s powerful stuff!

Martin Lewis on Investing vs Cash

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

With very best wishes,

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

US intervention in Venezuela

Like many of you, I have been closely following the recent developments in Venezuela with a sense of unease. The speed and tone of events have prompted me to reflect not only on the immediate implications for markets and investors, but also on the broader direction of US foreign policy. In particular, the episode raises uncomfortable questions about how the United States engages with politically unstable, resource-rich regions—and whether similar dynamics could emerge elsewhere in the future, including territories such as Greenland.

With the above in mind, I was pleased to read the following very helpful summary of the position in Venezuela from LGT Wealth Management earlier this week:

“Venezuela, with President Nicolás Maduro now in US custody, is in crisis. The seeds of this apparent regime change trace their roots to 1999, when former President Hugo Chávez assumed power. The Chávista government enacted sweeping nationalisation of private industry and businesses, launched large scale social spending programmes, consolidated political power and aligned itself with nations such as Iran and Cuba. High oil prices between 2000-2015 bankrolled this self-styled Bolivarian Revolution.

Hugo Chávez died of cancer in 2013, and Nicolás Maduro took over, keeping the same policies. By this point, the economy had collapsed under the weight of falling oil revenues, hyperinflation and geopolitical isolation. The state oil company, Petróle os de Venezuela SA (normally referred to as PDVSA) is reportedly run by the Venezuelan military and saw a major exodus of technically skilled engineering staff during the Chávez administration.

As such, it produces barely one million barrels of oil per day, despite Venezuela having the world’s largest proven oil reserves of 304 billion barrels equivalent. While having enormous potential as an energy producer, the fact that current production is so low is arguably why energy markets have not reacted in a meaningful way to the American intervention in Venezuela.

While the situation remains very fluid and we cannot speculate how the political situation on the ground in Caracas is going to evolve, we know that at least economically speaking, Venezuelans have endured extreme hardship, especially over the past 13 years where per capita income (as measured by the IMF) has dropped from USD 20,000 to only USD 7,250. That implies there would be a high appetite for economic change and new policies to stabilise prices and re -ignite growth. Who would helm that process and how long that would take is unclear.

A new kind of “realpolitik”

Given public statements from President Donald Trump, one conclusion is that the US is pursuing a unilateral, opportunistic strategy, especially when it comes to access to energy, be it fossil fuels or otherwise. One can imagine a scenario where US energy companies eventually step in and rebuild Venezuela’s energy sector, tapping untold large proven reserves.

That said, it would be naïve to assume that other global powers might not be motivated to act in an equal unilateral fashion, be it in energy, technology or other arenas. What this implies is that the coming years may see more assertive, interventionist behaviour by governments, not just the US. In the 19th century, this was referred to as “gun boat diplomacy” and is apparently making a comeback in the 21st century. The current version features modern weaponry and so called “hybrid warfare”, where combatant nations use a range of technologies and social media to undermine one another, without formal declarations of war. As a case in point, President Trump removed Maduro from power without consulting Congress or declaring war.

What does this mean for portfolios?

From an investment perspective, so far, the financial market’s reaction appears muted and contained. The US dollar has appreciated slightly, in line with its safe-haven status. On the fixed income side, US Treasury yields and credit spreads are also mostly unchanged. We note that major US oil companies and refiners have seen a boost to their share prices, arguably due to the market speculating that a revitalised Venezuelan energy sector will benefit the US most. Overall, the dust has yet to settle, and it may take time to ascertain a) who will take over from Maduro b) how this will happen and c) an understanding the scale of investment needed to repair the damage to Venezuela’s oil sector. If events unfold in a constructive manner, then we can assume an increase in global oil supply that could help lower inflation. Oil infrastructure suppliers would stand to gain substantially as well.

Geopolitics have become an increasingly important feature of investing in recent years, typically causing short-term dislocations. Investors have become more attuned to these, resulting in less skittish markets. Remaining invested through a diversified portfolio has been key to investor success and we continue to encourage investors to look past short -term noise and remain focussed on long-term investment goals.”

Author - Sanjay Rijhsinghani, Chief Investment Officer

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

With very best wishes,

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Festive Greetings!

Adam, Kim, and I would like to take this opportunity to thank you sincerely for your continued support, and of course to wish you and your family a very Merry Christmas and a happy, healthy New Year.

As we have done for several years now, rather than sending individual Christmas cards, we have once again chosen to mark the season by making a donation to a cause that is very close to our hearts.

This year, we are supporting Charlie Quirke’s Trek for a Cure in aid of Alzheimer’s Research UK.

Charlie has been bringing hope home this Christmas through an extraordinary trek undertaken in honour of his beloved mum, TV icon and national treasure Pauline Quirke MBE, who is living with dementia. Setting off on Monday 8 December, Charlie walked for five days across five counties, battling harsh winter conditions. While the physical challenge was immense, the emotional journey was even greater — something many may have seen if they caught his moving appearance on the BBC News.

The 140km trek retraced Pauline’s remarkable journey — from aspiring actress to sitcom superstar, and through her roles as daughter, wife, and mother — culminating at his parents’ home, where Charlie will spend Christmas.

Charlie and his dad, Steve (a good friend of mine), would be deeply grateful if any of you who have been affected by this cruel illness felt able to make a donation.

Sadly, we are living with dementia within our own family at the moment, and it is truly devastating. The sooner progress can be made, the better. Every donation, yours and mine alike, helps move us closer to hope.

If you would like to support Charlie’s incredible effort, please visit:

https://trek.charliestrek.org/

I am sure you will understand and support our decision to back this very important cause.

Finally, I hope that 2026 brings you all that you wish for. Please remember: every minute of life is precious and never repeated — so take time to enjoy it, to be grateful for it, and to celebrate simply being here.

With very best Christmas wishes,

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

The Budget – Initial Thoughts

The Budget – Initial Thoughts

After the most speculated about Budget in my lifetime, I’m writing to share a clear overview of the main changes announced in the 2025 UK Budget (26 November 2025) and what they may mean for your finances. These updates span tax, pensions, property, and long-term planning, so it’s worth being aware of the areas that may affect you over the coming months and years.

Headline Changes

1. Income Tax & National Insurance Thresholds Frozen

The Chancellor confirmed that tax thresholds will remain frozen until 2030/31.
While rates haven’t risen, the freeze means more people will gradually be drawn into higher tax bands as incomes rise.

Why it matters:

This “fiscal drag” effect may increase your overall tax bill over time. We’ll continue to manage your income and allowances efficiently to help mitigate its impact.

2. Higher Taxes on Dividends, Savings & Property Income

A range of investment-related taxes will rise from 2026 and 2027, targeting:

• Dividend income

• Savings interest

• Rental and other property income

Why it matters:

Tax-efficient wrappers (e.g., ISAs, pensions, some trust structures) become even more valuable. We may review the positioning of your investments to keep your portfolio as tax-efficient as possible.

3. Changes to Pensions & Salary Sacrifice

Reforms to pension salary-sacrifice arrangements will reduce the tax advantages for some employees from April 2029.

Why it matters:

If you make contributions via salary sacrifice, it may be worth reviewing whether this remains the optimal method. I’ll revisit this with you during our next planning review.

4. Property Taxes & New High-Value Property Surcharge

A new annual surcharge will apply to residential properties valued over £2 million from April 2028.

At the same time, taxes on property income will increase.

Why it matters:

Clients with higher-value homes or rental properties may see increased costs. We can explore ways to structure property holdings more efficiently where appropriate.

5. CGT & IHT Reforms Already in Motion

Although not new in this Budget, two significant reforms remain highly relevant:

• CGT rate changes (in effect since October 2024):
  Gains on most assets are now taxed at 18% (basic-rate) or 24% (higher/additional-rate).

• IHT reforms taking effect from 6 April 2025:
  The UK will tax long-term residents on worldwide assets for IHT purposes. Trust rules have also tightened.

Why it matters:

Clients with international assets or trust structures should review estate-planning arrangements to ensure they remain appropriate.

6. Economic Outlook & Spending

The Budget was set against subdued growth forecasts from the OBR. Government spending will focus on welfare support and business investment, with a continued drive toward fiscal consolidation.

Why it matters:

A cautious economic backdrop reinforces the importance of diversification and long-term discipline in your financial plan.

What Happens Next?

The devil is always in the details when it comes to Budgets, and it may be some days before all the implications are known. However, you can be assured that a more detailed communication on how the announced changes will likely impact you and all my clients will follow over the next few days.

I hope you found the above interesting. As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Deposit Protection Scheme Limits to Increase

It’s nice to see at least one threshold is rising with inflation!

The Prudential Regulation Authority (PRA) has confirmed that its deposit protection limit for banks will rise from £85,000 to £120,000 from December.

The protection limit is the maximum amount banking customers can receive in compensation were their bank to fail.

It is paid for by the Financial Services Compensation Scheme (FSCS), which is funded via a levy on banks and all FCA-regulated firms. 

I hope you found the above interesting. As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

An all-time high doesn’t mean anything!

As the FTSE hit a new record yesterday and now sits very close to 10,000 for the first time, I was reminded of a piece by 7IM which cam a cross me desk last week. I have reproduced it below.

“This year (to the end of September) the FTSE 100 has notched up 28 new records. 28 “all-time highs” in nine months, a pace which compares pretty favourably to the previous 28 all-time highs which took seven years to achieve (2018 through to 2024).

It’s a similar story in the rest of the world, with the US and Europe, but also Mexico, Japan, South Korea and many other markets all reaching new levels. It’s a funny thing though; for lots of investors, the phrase all-time highs doesn’t prompt celebration or acknowledgement of a plan that’s working (why else do you invest, if not to grow the assets?!). Instead, it often leads to questions about selling, wondering whether things have gone too far, or worries about an impending crash.

An all-time high doesn’t mean anything

People overstate how important an all-time high is. Maybe it’s a lifetime of hearing analogies between markets and rollercoasters; we have some intuitive idea that a peak is followed by a decline; what goes up must come down.

But markets aren’t rollercoasters, and all-time highs are often misunderstood and overemphasised.

The cynic in me blames lazy journalism. A market at all time highs is worth 500 words. And a market off all-time highs? Sure, have another 500 words. The gift that keeps on giving.

But there are two simple truths to try and remember when the “all-time high” hype train gets going:

1. Stock markets go up over time.

2. Stock markets bounce around a lot.

Any time something hits an all-time high – that’s just point 1. And any time something falls from an all-time high – that’s just point 2.

Any single all-time high isn’t actually that important. It’s just part of the way markets work.

All-time highs are vital

The thing is people also underestimate how important all-time highs are. Without the occasional all-time high, your investment will go nowhere.

Take the Japanese stock market, the TOPIX. It’s had 15 new highs this year. And it had three new highs in 2024. But before that?

The last time the TOPIX was at an all-time high before 2024, the Berlin Wall had just fallen, a show called The Simpsons had just launched, and the British music scene was dominated by Kylie Minogue and Jason Donovan: December 18th, 1989.

So, for 35 years (about 8000 trading days) Japanese markets made no progress.

Compare that to the FTSE 100: 264 all-time highs between 1989 and 2024. That’s not so many really; around 3% of those 8,000 days.

And yet it resulted in the index being 220% higher than it was on December 18th, 1989 – more than triple your money.

To put it another way; NOT being at an all-time high most of the time (97%!) is ok. That 3% does a lot of heavy lifting. But once that 3% drops to zero, it’s a very different matter – as the TOPIX showed for more than three decades.

Don’t forget the dividends

Compounding creates wealth more efficiently than any other method. Take your dividends and stick them straight back into the market. Make your money keep working for you, and it creates more money!

And most of the attention on all-time highs focuses on stock indices which DON’T INCLUDE DIVIDENDS!

Much like Japan, the FTSE 100 index had a period without any new highs – from December 1999 to February 2015. But if you’d been invested through that period and kept adding your dividend payments back to your holdings, the 15-year wait got a lot shorter. You still had to wait for 5 years, but that’s the risk with any investing!

Source: FactSet

Managing money is about managing emotions

In the investment team, we don’t pay attention to “all-time highs.” I’d love it if the media did the same, but I suspect that’s not going to happen any time soon.

So, instead, the best advice I can give is to reframe how you respond to headlines about the phenomenon.

New all-time high? “Great, that’s why I invest – growth in capital over time, I certainly don’t want my money standing still!”

Market no longer at an all-time high? “Excellent, my dividend reinvestments are buying more stock than they were yesterday!” Or even “Ah! The sale is on! What a fantastic opportunity to invest at a cheaper price!”

Now of course, depending on your time horizon, it might feel a little bit more pressing when stock markets fall. But that’s what the rest of the portfolio is for (and why it’s so important to get the right blend of investment assets for your stage in life). The bonds and alternative parts of the portfolio are there to stabilise things – to give the equity side the time and space to get back on an upwards trajectory!”

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

 Graham Ponting CFP Chartered MCSI

Managing Partner

Unintended consequences

Ever noticed a Wilkes’ Gob?

You may well have seen one at some point, if you’ve spent any time in Leicestershire (although you were probably looking at the beautiful countryside).

Or you might have seen something similar if you’ve been to Brick Lane in Shoreditch (although you were probably looking at the beautiful selection of curries).

A Wilkes’ Gob is a type of brick. Specifically, a double-sized brick:

Source: Wikimedia Commons, Measham, Leicestershire, Wilkes’ Gob on the left

In 1784, the British government needed cash to cover the cost of the American War of Independence. And with new towns springing up as the Industrial Revolution took hold, MPs imposed a “brick tax” of 2 shillings and sixpence for every thousand bricks produced.

The result? BIGGER BRICKS. For fifteen years, until the government closed the loophole.

The Wilkes’ Gob is a wonderful real-world example of why clever tax ideas often don’t produce sensible outcomes – people find other solutions.

Ahead of the budget in a few weeks, here are a couple of the other more … quirky … taxes in British history; and the resulting behaviour, which very rarely involved paying the tax!

• The Hat Tax was also introduced in 1784 (expensive, that war!). The idea was that richer people would have more hats, so would have to pay more tax. Quite aggressively, the punishment for forging hat-tax stamps was death! Of course, people either stopped wearing hats, or started wearing these new-fangled things called “caps” which were exempt!

•  The Window Tax (1696). In the 17th century, most people thought the government had no business asking them about their income. So when William III needed to raise money, he had to do it based on things his revenue officers could count. Like windows. More windows = bigger house = more money = more tax. Result – bricked up windows all across the country (which you can still see). And, allegedly, the creation of the phrase “daylight robbery” to describe the tax.

But. The most surprising tax fact we learned during our research: until 1990, in the UK, a married woman’s tax rate was the same as her husband’s! (Her income was simply added to his to determine the tax rate paid) And when that rule changed, with the advent of independent taxation, the UK workforce saw a significant uptick in female workers.

Tax isn’t just about the numbers. It’s about the behaviour.

I’ll share a more considered take on the Budget once the details are out. For now, the speculation isn’t helping anyone — and Reeves’ rather cryptic remarks yesterday didn’t exactly bring much clarity!

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Government’s Response to AJ Bell’s Petition for a Pensions Tax-Lock

I wrote to you on 8 October regarding AJ Bell’s call for the Government to protect key pension tax incentives and put an end to speculation around the future of tax-free cash and pension tax relief.

On 1st October, the wealth manager launched a parliamentary petition urging a public commitment to a “Pension Tax Lock” – a pledge not to alter tax-free cash entitlement or pension tax relief for the duration of this Parliament.

AJ Bell argued that such a commitment would give savers much-needed certainty, enabling millions to plan for retirement with confidence.

As the petition attracted over 10,000 signatures, the Government was required to issue a formal response.

The response is as follows:

The Government is committed to ensuring pensioners have security in retirement and has launched a Pensions Commission to look at what is required to ensure the system is strong, fair and sustainable.

The Government wishes to encourage pension saving, to help ensure that people have an income, or funds on which they can draw on, throughout retirement. The Government is committed to supporting savers at all stages of life. That is why, for the majority of savers, pension contributions made from income during working life are tax-free. This is known as 'pensions tax relief'. This relief is available at an individual's marginal rate. For example, contributions from a basic rate (20 per cent) taxpayer who contributes to a registered pension scheme in 2025/26 receives tax relief at 20 per cent. This makes pensions tax relief one of the most expensive reliefs in the personal tax system, costing £78 billion in 2023/24.

Investment growth of assets in a pension scheme is also not subject to tax. From age 55 (or when scheme rules allow a pension to be taken), up to 25 per cent of the pension can be taken tax-free (capped for most at a maximum of £268,275), depending on scheme rules. Pension income received (for example as a regular annuity payment or as income drawn down from a pension) is subject to income tax at an individual's marginal rate, to reflect the fact that pensions in payment are a form of deferred income and have not been previously taxed.

With regard to the proposed ‘pension tax lock’, the Government does not comment on proposed tax changes or tax related speculation ahead of Budgets.

The Government recognises the importance of promoting confidence in pension saving and is committed to ensuring future generations of pensioners have security in retirement. This is why the government announced a landmark two-phased review of the pensions system days after coming into office.

The first phase, the Pensions Investment Review, focused on reforming the pensions landscape to boost savers’ pension pots. These reforms will be delivered through the Pension Schemes Bill. The Pensions Commission will build on these foundations and make recommendations to the government on the broader questions of adequacy, fairness, and sustainability to guide the long-term future of our pensions system. The Pensions Commission will be undertaken by Baroness Jeannie Drake, Sir Ian Cheshire and Professor Nick Pearce.

I am afraid this kind of wishy-washy response was to be expected, and it doesn’t really take us any further forward.

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner