Jeff Salway: Expect renewal, reform and rebellion in 2013

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I’VE always thought New Year predictions were an easy way out for a journalist writing their column some time in advance and hoping no-one notices.

So why break with tradition? I used this space a year ago to set out a few predictions for the year ahead. I’ve forgotten what I claimed was in store and I hope you have too.

With that in mind, what lies ahead for 2013?

It’s set to be a year of renewal, reform and possibly rebellion. One of the biggest changes has already taken effect, with the retail distribution review (RDR) coming into force last Monday. It primarily means that financial advisers can no longer be paid commission by investment providers for selling their products. The idea is to eliminate the bias behind mis-selling, but it’s caused no end of ructions in the six years it’s been in the pipeline.

I suspect the controversy is far from over. Firms are finding ways around the new rules that could seriously undermine the reforms.

The job of policing that will in April fall to the Financial Conduct Authority, which takes the regulatory baton from the Financial Services Authority (FSA). It promises to take a tougher approach than the FSA, but that could bring its own problems if it fails to maintain a decent balance between keeping companies in check and protecting consumers. Expect teething troubles and controversy.

So what of rebellion? This is probably wishful thinking, but I hope it concerns the government’s assault on benefits recipients. Polls taken before Christmas revealed a change in public attitudes towards the government’s benefits policies. The 1 per cent cap on benefits including jobseeker’s allowance, child benefit and income support, announced in the Autumn Statement may have been a step too far. The government claims to be backing strivers and attacking shirkers, yet 60 per cent of the below-inflation rise affects working families. Rising awareness of the impact of benefit cuts on the disabled and the poor has stiffened opposition against austerity. It’s clearly not getting us anywhere and the government is on the wrong side of the argument, morally and economically.

The next 12 months will also see more workers paying into pensions for the first time, following the introduction of automatic enrolment last October; payday lenders will come under closer scrutiny; annuity rates will continue falling, forcing many people into riskier retirement income solutions; the Scottish mortgage market will continue its very gradual improvement as lenders slowly ease their restrictions on first-time buyers; and the consumer shift away from the big high-street banks will gather pace as competition improves, online lenders gain credibility and the Libor stink refuses to go away.

HMRC sets tax traps for unwary

FOR many people the post-Christmas blues are exacerbated by the realisation that the end of January is the self-assessment tax deadline.

Hitting that deadline is more important than ever, given the heavy penalties that HM Revenue & Customs gleefully dishes out to anyone getting their returns in late. Don’t assume that you’ll be all right if you don’t owe any tax. The revenue will still fine you, revelling in its zero-tolerance attitude to the humble taxpayer – starkly different to HMRC’s relaxed approach to the multinationals.

Thousands more people are set to be dragged kicking and screaming into the self-assessment system, thanks to some spectacularly inept government policymaking.

The changes to child benefits that come into 
force tomorrow are a recipe for chaos. For reasons that have never been made clear, the government decided 
that the best way to restrict child benefit was in the form of a tax payment: the high-income child benefit charge.

Households receiving child benefit and with at least one earner on more than £50,000 a year face a pretty unappetising choice. They can either stop claiming the benefit, or they can continue receiving it and risk being penalised by the revenue, which will claw back any overpayments through self-assessment.

Not claiming it may seem the option of least hassle, but there are still pitfalls. For instance, you could lose 
out on national insurance credits that ensure you maintain your entitlement to the state pension and other benefits.

The big winner out of this will be HM Revenue & Customs, ready to rake in fines from those new to self-assessment and falling into its carefully laid traps.