Two of the biggest winners on the stock market were Hargreaves Lansdown and St James’s Place. Shares in Hargreaves jumped as high as £12.46, just over 4%, on Chancellor of the Exchequer, George Osborne’s announcement of further savings initiatives that included increased ISA flexibility and an ISA designed to help first time house buyers. Shares came back somewhat in afternoon trade but are still almost 3% higher on the day. St. James’s Place stock traded as much as 5% higher at £9.76 on the news.
Brewin Dolphin stock also got a boost, trading up 2.3% on a day when the FTSE 100 rose 1.57%. Charles Stanley was also up but only just over 1%.
On the other side of the equation, the big banks slipped a little, Barclays was down 0.6%, Lloyds fell too, initially, but recovered almost all of the losses, while Royal Bank of Scotland was down 1.15% by 16h00. At least part of this decline came on the back of the announced increase in banking taxes.
As Osborne explained in the speech: “We will also stop banks from deducting from corporation tax the compensation they make to customers for products they have been mis-sold, like PPI. Taken together these new banking taxes will raise £5.3bn across the forecast.”
It was not, however, just stocks that were moving on the day.
Gilt yields fell in the course of the morning, as Threadneedle’s Toby Nangle pointed out it was difficult to tell if the move was related to the budget or the weak labour market data that came out earlier in the day.
Gilt yields lower today but hard to say related to Osborne debt reduction plans. Due instead to weak labour mkt data pic.twitter.com/sy8n1Otj3N
— Toby Nangle (@toby_n) March 18, 2015
While there was good news on the macro front, the news was more mixed on the savings and pensions changes.
Indeed, another graph from Nangle summed up much of the initial reaction.
Nangle
HMT models say the losers from this Budget were rich & poor. Middle-earners net benefit. https://t.co/s2G3hbplzq pic.twitter.com/lFACXB7Atf
— Toby Nangle (@toby_n) March 18, 2015
Comments were largely positive on the introduction of the new, flexible ISA, or, as Brewin Dolphin’s Guy Foster called it the new “in, out, shake it all about” ISA, but as he pointed out, it is likely to prove a headache for providers.
Can now take cash out of an ISA and put it back in later. Tricky for providers and pointless for savers #Budget2015
— Guy Foster (@Brewin_Guy) March 18, 2015
Adrian Lowcock, head of investing at, AXA Wealth was also positive on the new products, saying that they could boost usage by younger savers.
He said: “we do need to be wary of damaging the success of ISAs by trying to make them all things to all people. The ISA is a successful because of its simplicity, yet for many it still remains too complicated. In the future the government need to ease off on the tinkering and focus on the communication of the benefits of ISAs.”
However, as Darius McDermott, MD at Chelsea Financial Services, pointed out, while happy with the ISA changes, he was less happy with other pension related changes, in particular cut to the lifetime pension allowance, from £1.25m to £1m.
Shame to hear that the lifetime allowance on pensions has been cut to £1m, but more flexibility on ISAs is great news for savers #Budget2015
— Darius McDermott (@DariusMcDermott) March 18, 2015
Jason Hollands too was less than pleased.
Someone with £1m pension, taking 25% cash & buying a £750k annuity will get an income of circa £21k. Cut to lifetime allowance v retrograde
— Jason Hollands (@jasonhollands) March 18, 2015
Politicians should stop meddling with the #pension allowances. It undermines confidence in the system #Budget2015
— Jason Hollands (@jasonhollands) March 18, 2015
Hollands was also cautious of the changes made to VCTs.
As he said: “The relentless cuts to pension allowances have already resulted in more and more affluent investors looking at alternative tax efficient schemes, namely VCTs and EIS, and the latest reduction is sure to fuel demand.
However, Osborne announced a number of tweaks to these schemes in a bid to ensure they comply with EU state aid regulations.
“In particular, future VCT and EIS investments will be restricted to companies less than 12-years old, other than where the investment ‘will lead to a substantial change in the company’s activity.’”, Hollands said.
He added: “While the VCT industry is used to successfully accommodating periodic changes, the shift to direct new VCT investment towards earlier phase investments is likely to cause some head scratching at management groups, who will want to engage with HMRC to get clarity over what might constitute a ‘substantial change in the company’s activity.’”
As with all budget statements it was always going to be an impossible task to please everyone, especially in an election year, but for wealth managers, the one definite positive that should be taken away is the explicit intention to push Britain to become a nation of savers.
And, as Liz Field, CEO of the Wealth Management Association put it: “the proposals outlined by the government today provide positive reinforcement to a cultural shift towards saving and investments. four million private clients are already represented by our wealth management community and the growth this allows for UK plc and the returns for the investor cannot be underestimated.”
