This was the first Autumn Statement from Chancellor Philip Hammond, and it started with a revision of UK growth expectations. This was to be expected as we face an uncertain economic environment; and the slow to 1.4% growth in 2017 was less severe than many city analysts have projected.
The Chancellor announced investment in infrastructure, a commitment to low corporation tax, and measures to place further restrictions on tax avoidance. This was alongside two measures that make it easier for workers in the UK to save.
Changes in income tax
The first measure the Chancellor announced was an increase in the tax-free personal allowance. In April 2017, it will rise to £11,500 giving workers on £25,000 and above almost £100 extra each year. But it was also announced that by 2020 the tax-free personal allowance will be £12,500 and the higher rate threshold will rise to £50,000.
By raising the tax-free personal allowance and higher rate threshold, the government is providing Brits a terrific opportunity to save and invest more money. By 2020 when these changes are in full effect, people earning £30,000 will have close to an additional £300 in their purse each year while those earning £50,000 will be as much as £1,700 better off. Investing this money for the future, as it is earned, is an incredibly easy way to grow wealth over time.
New savings bond
It was also announced that the government will launch a new savings bond through National Savings & Insurance, with the details being announced in the spring. This acted as a reminder from the government that interest rates are low so Brits need to consider an alternative to cash savings.
This savings bond provides one potential solution, but this solution will only help with capital preservation. When signing up to this bond you will tie up your money for three years, in return for, a currently competitive, 2.2% a year. However, some expectations suggest inflation may shoot above the 2% target set by the Bank of England during that time frame, in which case locking money into this bond may hinder wealth growth.
This is one option, but you need to look at your personal circumstance and financial goals to see if a savings bond is a good solution for you. There are other alternatives to cash savings in the investment market. Whilst the value of your investment may go down, as well as up, the Barclays Equity Gilt Survey suggests that you have a 75% chance of investments outperforming cash over a five-year period.
