Budget 2015: Clifton Asset Management turns spotlight on George Osborne’s vision

George Osborne declared “Britain is walking tall again” as he delivered his final Budget before the General Election.
[image type=”thumbnail” float=”left” src=”/wp-content/uploads/sites/2/2015/06/george-osborne-2.jpg” alt=”George Osborne” info=”none” info_place=”top” info_trigger=”hover”]
But what economic path has the Chancellor set us on before the nation goes to the polls in a few weeks?
One of Mr Osborne’s headline announcements was to cut the pension lifetime allowance from £1.25 million to £1 million.
“Is the Government encouraging us to save for the future elsewhere?” asks Emma Hall from Clifton Wealth.
[blockquote]“Will the Government bring in another form of Fixed Protection for 2015/16/17 for clients who maybe close to the £1.25 million by that time?”[/blockquote]

Clifton Asset Management Group Financial Planning Director Anthony Carty attacked the move.

[blockquote]“In my opinion this is a retrograde step further disenfranchising company executives and business owners in terms of building their pension wealth. This is at a time when the very same audience needs to be engaged with pensions for their employees due to auto enrolment.”[/blockquote]

[blockquote]“I would have thought it would be more sensible to dispense with the lifetime allowance altogether and simply reduce the annual contribution limit or restrict the level of tax relief on those contributions.”[/blockquote]

The move to cut the allowance, which will be indexed from 2018 and save around £600 million a year, came as the Chancellor revealed reforms to ISAs, giving people the opportunity to take money out and pay it back in again.
By making ISAs more flexible, is the Government making them more attractive in an attempt to encourage us to use them instead of pensions? It would certainly save them a lot in terms of tax relief.
Another well-trumpeted announcement was allowing five million British pensioners to get their hands on their pension pots.
By giving them the ability to sell their annuity income to a third party the money paid can either be taken as a lump sum or put into a drawdown contract for investment.
In both scenarios the tax will be at the individual’s marginal income tax rate.
Emma said this was “great flexibility” for clients but begs the question how would the Government regulate this and how would the underwriting be done on the individual who owned the annuity?
The Chancellor also tackled the problems of first-time buyers trying to get onto the housing market with Save to Buy ISAs.
First-time buyers will get a £50 top-up from the Government for every £200 invested in a Save to Buy ISA.
Will this encourage growth in the property market again? The Government relief is up to a maximum of £3,000 and can only be used to buy properties worth up to £250,000 or £450,000 in London.
The cash incentive from the Government will also only be paid when the purchase goes ahead and therefore no interest can be earned on the £3,000.
[blockquote]“This is heavily dependent on people’s earnings and the banks’ ability to lend. The Budget reports that employment rates are rising but earnings growth has slowed,”[/blockquote]

No longer ‘invisible’

One of the consequences of the financial meltdown over the last seven years has been the gradual awakening of the establishment to the power and importance of our small business community.

That is not to say that small business has been completely invisible for the last half century, but I have found that the vast majority of those making policy with regard to SMEs have been paying lip-service to a perceived voting bloc rather than dealing with fundamental issues of support, financing, risk and education.

Of course small businesses are good. Of course they are engines of growth, of course they employ millions. But in the end small businesses, in general, have been going it alone. Where there has been support for owners it has generally been from friends and families or sometimes begrudging lenders, who talk a good game but simply don’t know how to deal with small businesses individually. Owners often complain about all being “tarred with the same brush”.

This week I am speaking at an event organised by the Goldman Sachs 10,000 Small Business Programme. This innovative programme, launched in 2010, brings together small business owners and over a one-day-a-week for 12 weeks introduces participants to experts from all areas of business who will help provide vital support to overcome the daily challenges faced by UK business owners.

The programme boasts the might of one of the great global finance giants and the fact that it has initiated this programme speaks volumes about the serious approach that is now being taken toward this often overlooked sector.

It is practical and forward-looking and I am extremely pleased to be involved in this enterprise, as it mimics much of the work that we do at Clifton Asset Management.

Rather than simply dispensing information, both Goldman Sachs and Clifton recognise that we need to help businesses create a successful pathway, one that enables them to access capital, grow and create profits.

Okay, 12 one-day sessions may not solve all the immediate problems faced in business, but it is a fantastic launch pad. As one of the owners interviewed in the excellent Goldman Sachs 10,000 Small Business Programme video remarked, “the end of the course was really just the start.”

Exciting and dynamic. More please.

Alternative funding going mainstream

There is currently quite a lot of noise about alternative funding in the UK, specifically in the SME sector. In fact I’ll happily hold up my hand and say that we at Clifton Asset Management plc have been among the loudest of the drum-bangers in this regard, with our pension-led funding solution.

There is still a lot of work that needs to be done for the banks in this country to repair themselves, with some estimates talking of at least another decade.

This will require fixing balance sheets, complying with new capital requirements and other international restrictions, all carried out in a generally hostile environment and hitting some of the banks’ most profitable activities – speculative investing and trading.

And so this leaves a large and perplexing gap in the marketplace, one which many industries (witness this recent article in Construction News) are now acknowledging and grappling with.

But, with so many different ways of skinning this particular funding-hungry cat, how on earth can the harried business owner work his way through this field?

I have referred to one of my solutions in the past, effectively a clearing house to find appropriate funding options for business owners who have failed to convince their bank manager of their case.

I am pleased to say that as a result of my recent trip to Number 10, this has been received positively by the powers-that-be and I look forward to letting you know more about this as the weeks go by.

It is my belief that we will soon be able to do away with the label of alternative funding, as the variety of options available to business owners becomes clearer and those options are considered equally alongside those offered by the more traditional high street lenders.