Rodney Bonnard, UK Insurance Leader at EY, comments on the impact on the insurance market: Insurers will have been relieved after Philip Hammond delivered a Budget with no direct changes for the industry. Recent visits to the Despatch box have rocked the industry with the aftershocks of his predecessor’s seismic 2014 Budget, which abolished the need to buy an annuity, but this time all was calm. No changes to pension tax relief. No further increase in Insurance Premium Tax. No new ISA variants.
“Instead, the Budget delivered some mild positives for the industry without offering anything revolutionary. The increase in R&D tax credits will be welcome for companies investing to transform themselves into digital businesses. His measures to get more young people onto the housing ladder will take time to have a big effect but might eventually increase their need for home and life insurance. His announcement that the Pensions Regulator has been asked to clarify its guidance on long term investments is welcome, but pension schemes are already starting to incorporate alternative long term investments in their portfolios, so the impact will be more incremental than revolutionary.
Driverless cars and impact on insurers
“Motor insurers might feel a bit of unease about the long term impacts of this Budget. While the Chancellor’s key measures were focused on electric cars, the full Budget talks about making the UK a leader in driverless car technology – something that is likely to have a significant knock-on impact on insurers. When cars are fully autonomous, who is responsible for a crash? Will customers and insurers look to the car makers, and therefore expect them to package insurance with the car itself? This Budget asks for those questions to be answered as soon as possible.”
Pensions tax relief
“In the longer term, it’s unlikely that the calm will last. Pensions tax relief remains a major concern for the Government and is seen as offering too much to the wealthy while failing to incentivise those who most need to save. This Budget seems to signal that pensions will be a secondary concern until our future relationship with Europe and the world is clearer, but there will be further pensions earthquakes to come.”
Half steam ahead for pension funds - enabling investment in innovative businesses
Iain Brown, EMEIA Head of Pensions Advisory, comments on pension funds: The Chancellor spoke of enabling pension funds to invest in innovative businesses, and has asked the Pensions Regulator to clarify its guidance on long term investments. He hopes to transform the supply of capital for innovation – but while we welcome clarity, in reality this is not new; he is offering no new incentive, and many pension schemes are already shifting their investment strategies to incorporate alternative long term investments, including investing in innovative businesses. As a result, the impact for pension schemes is likely to be minimal.
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