Rishi buys now, pays later

The 1-minute read to get the money news you need with expert adviser commentary.

An economic emergency

Rishi Sunak’s Spending Review unveiled increased spending* for jobs support, the NHS, and the military. The pandemic will have shrunk the economy by 11.3% this year - tax rises will come later; but for now, borrowing is set to increase to the highest levels ever seen in peacetime. A consolation is that this borrowing is more affordable than it was in 2008.

And that’s optimistic

Think tanks are saying Rishi’s Spending Review is optimistic. No COVID-related spending has been budgeted for after next year, and non-COVID department spending saw £10bn cut from previous plans. The leading Institute for Fiscal Studies (IFS) thinks he’ll need to spend more.

Private pensions to lose £96bn

The Spending Review also revealed that the government will stop using the retail prices index (RPI) measure of inflation in 2030. The new measure is currently 0.4 percentage points lower, which means lower returns for investors in index-linked bonds, which includes pension funds.

Adviser Comment - This has been expected for some time - it could be viewed as a positive that the start of this has been pushed until 2030. This further highlights the need to be proactive with saving for your retirement.