"We're all in this together," intones George Osborne as he points out that the country is forking out £43bn a year in debt interest to service the largest structural deficit in Europe. Here's how you're "in it":
■ Pensions
Mr Osbourne announced that the state pension age will rise for both men and women to age 66 by 2020. This is four years earlier than planned, and a surprise announcement given that the change raises no money in this parliament. It could, however, result in a higher private pension for those who also choose to delay taking their private pension. According to Standard Life, by delaying retirement by just one year, a 45-year-old man saving £200 a month could increase his private pension by nearly 10 per cent. The table below sets out the income that could be received by men starting to save £200 a month at ages 25, 35, 45 and 55 and delaying their retirement from age 65 to age 66.
| Age when saving starts | Pension at 65 | Pension at 66 | % increase |
|---|---|---|---|
| 25 | £13,356 | £14,364 | 7.50% |
| 35 | £8,196 | £8,880 | 8.30% |
| 45 | £4,548 | £4,992 | 9.80% |
| 55 | £1,956 | £2,244 | 14.70% |
Source: Standard Life
The Chancellor also said that employee contributions to pension funds need to increase, but added that this would be 'staggered and protected'. If you work in the public sector, you'll be paying more - but details will have to wait until the full Hutton report is presented. If you work in the private sector, you could be facing pension auto-enrolment within a few years; the government confirmed it will proceed with Labour's National Employment Savings Trust (Nest).
■ Equitable Life
Welcome news was the Chancellor's announcement that Equitable Life policyholders would receive compensation for their "relative loss" to the tune of £1.5bn. This amount is more than three times larger than the £400m recommended in the official review, but falls below the £4-5bn wanted by some policyholders of the collapsed mutual insurer. The scheme is expected to start making payments to policyholders and with-profit annuity holders, by next year.
■ Tax
The government will continue its clampdown on tax avoidance, with Mr Osborne committing a further £100m to clamping down on tax evasion. He expects this to find £7bn in 'missing' tax revenues.
Paul Harrison, tax partner at KPMG in the UK, encouraged HMRC to look for ways to encourage voluntary disclosure and compliance, saying he would expect them to take the lessons from recent "so called amnesties" such as the Offshore Disclosure Facility and the Liechtenstein Disclosure Facility, to see how the principles can be rolled out more effectively.
■ Child Benefit
No backing down on this one. Mr Osborne confirmed the cut to child benefit payouts for high earners, which will see households where one parent falls within the 40 per cent or 50 per cent income tax band lose their child benefits by 2013. The estimate of savings so made was increased to £2.5bn a year.
Financial planning experts say the best way for high earners to get around this cut is by upping their pension contributions and thereby ensuring they remain below the higher tax rate band which will be £43,875 by 2013, when the cut to child benefit payouts is expected to come into force.
■ Investments
For investors the spending review held little enticing news. However, Mr Osborne's commitment to making Britain a leader of the "new green economy" via a £1bn commitment to the world's first commercial scale carbon capture and storage demonstration projects, an investment of £200 million in the development of off-shore wind technology and manufacturing at port sites and £1bn set aside for the funding of a green investment bank, could yet open up some enticing opportunities for green-themed investors.
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