It was perhaps inevitable that this Budget would be taken over by events out of its control. The Coronavirus is dominating headlines the world over and, naturally, the Government recognised that now was not the right time to be tinkering with taxation concerns and pension legislation.
So most of the comment from the Chancellor of the Exchequer concerned a commitment to ensure that the NHS had sufficient resources to cope with the escalation of the epidemic, along with some element of protection for both firms and workers who were directly affected by it.
A lot of the spending headlines were around the broader long term ‘Infrastructure Revolution’ with various announcements around spending on road, rail, broadband and housing, which are estimated to cost around £600bn by the middle of 2025. Money has also been allocated for investment in technology and carbon capture & storage.
All of this meant that there were just two key announcements for savers and investors.
The first concerned those affected by the tapered annual allowance for pension contributions. Broadly, the income levels at which people are affected was increased by £90,000, which means it is only an issue if your income is in excess of £240,000 (rather than £150,000).
The second – not announced in the speech but hidden in the full document – was that the Junior ISA allowance is to almost double, rising from the current £4,368 to £9,000 next tax year.
Commenting on the rise, Darius McDermott, managing director of FundCalibre, said: “The increase to Junior ISA limits came as a positive surprise.
“Investing £750 a month over a period of 18 years could result in enough money to not only pay for university fees, but also the purchase of a house – or a substantial deposit. Assuming 5% annual returns, an overall investment of £162,000 would grow to a pot of money worth £261,901.52*.
“Admittedly, few people could afford to save this amount of money for their children year in year out, especially if they are also trying to save for their own ISAs – the average Junior ISA subscription according to HMRC is just £1,421** – but it does give us all something to which we can aspire.”
Three Junior ISA funds that could benefit from other Budget spending:
Recently launched Investec Global Environment is a global equities fund that includes emerging markets, but which has a unique approach of only investing in companies that are contributing to the decarbonisation of the world economy. The portfolio has complete conviction, with just 20-40 holdings.
Investing in Britain’s smallest businesses, Liontrust UK Micro-Cap only invests in profitable companies. Each holding in the portfolio must have at least one intangible asset. These include a strong distribution network, high recurring revenues or a strong brand. The team also looks for director ownership of at least 3% of the company. Currently, almost a third of the fund is invested in technology companies***.
VT Gravis UK Infrastructure Income invests mainly in investment trusts exposed to different types of UK infrastructure: from hospitals, GP surgeries and schools to railways, roads wind and solar power. It has an income target of 5% per annum and offers an excellent way to invest in the growing need for infrastructure in the UK. It can invest in infrastructure debt, as well as equities.