What Happened?
The UK government usually announces their Autumn Budget in November each year, announcing how the funds that are acquired via taxation will be spent across Government. Due to the cost of living crisis and rising energy bills, a mini-budget was announced in September 2022 which caused a stir in the financial world and almost crashed pension funds across the country. The budget, which was supposed to provide some relief to struggling households and businesses, ended up causing more harm than good and ultimately was the end of Liz Truss’ tenure as PM.
The main announcements related to changes to income tax (both higher and lower rates), corporation tax, energy bills, and VAT. Essentially, pensions were affected by the mini budget via a knock-on effect due to the fact that Government borrowing became more expensive due to the rise in the cost of gilts (pension funds usually invest in these gilts as a stable, predictable investment).
The markets were spooked by this sudden change, and were worried that the government would have to borrow a lot of money for its unfunded budget announcement, and potentially be unable to pay back money owed. Reportedly, the pension industry was not far away from crashing and the Bank of England even had to step in and bail out the bonds market.
Who Suffered?
The Government’s Response
In response to the backlash (both internally within the Conservative party, but also from the markets and members of the public), the government quickly backtracked on many of the proposed changes. However, the damage had already been done, and many pensioners and pension fund managers were left feeling uncertain about the future of their retirement savings. Out of eight major announcements, only three actually went ahead; including a reverse in a rise in National Insurance, retaining a lack of stamp duty on the first £250,000 of a properties value, and no duty on the first £425,000 of a first time buyers property.
- More and more, the public are looking for the best deals on pensions and expat pensions alike, with companies such as SpotDif leading the way.
Another issue with the mini budget was the lack of support for small businesses. Despite the fact that small businesses have been hit hard by the COVID-19 pandemic, the mini budget did not include any significant measures to help them. This could have further weakened the economy, as small businesses contribute significantly to job creation and economic growth.
In conclusion, the mini budget almost crashed pension funds across the country and caused widespread concern among pensioners and pension fund managers. Unfunded budget announcements had a negative effect on the markets which caused Sterling to drop, and the Government cost of borrowing to increase dramatically. The mini budget also included several other measures that caused concern among financial experts, including the lack of support for small businesses and the increase in taxes on high-income earners. Overall, the mini budget was a failure and did little to address the economic challenges facing the country and ultimately had greater adverse effects – however for pensions, this appears to have been mostly temporary.
As the announcements were backtracked with a big u-turn and the Bank of England stepped in, there was a temporary crisis however, pensions appear to have stabilised since, whilst the Government conducts a short (or mini?!) inquiry.
Overview
Luke Sartain is a Specialist in Home & Business Services for Spotdif. He has a passion for finding the best business deals in the UK and helping people save money on their home services. Luke is also a creative writer, and he enjoys writing short stories in his spare time.
He’s also got a wealth of knowledge when it comes to home deals – so if you’re looking for a new property, or want to renovate your current one, Luke is your man! He’s also experienced in business services, so whatever you need help with, he’s your go-to guy.
He has a passion for finding the best business deals in the UK and helping homeowners get the best home deals. Luke is also a creative thinker, and he brings this creativity to his work with Spotdif, where he helps businesses find the best services at the best prices.
