Covid-19 and tax changes present a potent mix for retirement

One is whether people working from home should return to the office. As someone who between 1998 and 2005 hot-desked between four locations in different parts of the country and worked from both my own and my partner’s home in between, I cannot really understand why we are debating remote working in 2020.

It seems to me that many employers who were behind the curve, have woken up to some of the advantages of remote working, and we will see a rapid transformation in how we work in future.

Those employers who had already embraced remote working were better able to maintain customer service than those who had to quickly get up to speed. Where I live, I can well understand those who do not wish to go back to commuting to London every day.

However, this does not mean the end of the office. What will happen is that the office will be used where it adds real value to the employer and the employee, not just because it is there. More flexible working lifestyles will evolve. This is the future.

The other issue is benefits and tax. The Government has paid huge sums in benefits to individuals and businesses to help them survive the lockdown.

Some comments you may be familiar with around this topic are: “I pay too much tax”; “They avoid tax unfairly”; “We should improve public services”; “We should reduce the State”; “We should do more to help the disadvantaged”; “Those who receive benefits are scroungers”; “I have paid taxes all my life, where are the benefits I feel entitled to?”

What I find interesting is the number of people I know who make contradictory statements. Covid-19 has left a large hole in the government finances. Whilst the economy transitions to its future model that hole is going to get larger before it begins to reduce.

The media is full of rumours, which taxes will increase, what new taxes may be introduced, where tax reliefs may be frozen, reformed or removed, where benefits or public services may be cut or removed.

It feels like this is a popularity test. These measures will raise £Xbn and upset Y% of the electorate so those that will be introduced should be those with the largest ‘X’ and smallest ‘Y’. I would like to think that the Government will take a more strategic approach.
The measures taken must be joined up to a strategy.

That strategy must be able to cope with the combination of the following two extreme scenarios:

• A Winter second wave of the virus, leading to many localised lockdowns or another national lockdown.
• A vaccine being developed and by Autumn 2021 the virus is as good as eradicated from the UK.

Until the virus is eradicated, there will continue to be flare ups. This means social distancing will continue until a vaccine is developed. Hopefully, the flare ups will be small but until then employers will need to continue to invest in improving their virtual working capabilities as contingency planning.

This requires several economic models to be presented as the future path of the economy. The measures taken must be adaptable. As is remote working.

Whatever measures are taken, they will undoubtedly impact upon individuals’ retirement finances. There have already been winners and losers in how lockdown has affected people differently. Now overlaying that we must anticipate changes as to how retirement income is calculated, and taxed. The Chancellor has the support of the economic mandarins in the Treasury. Who does the person who is recently retired or about to retire have?

We are in an era of rapid change. The impacts of the virus on individual lives; the impacts of Government actions on the economy and individuals; and the impacts of change in individual behaviours on all of this. Clients will be faced by a myriad of confusing signals. Never before has good quality retirement advice covering all aspects of their retirement wealth been so important.