Steven Cameron, Pensions Director at Aegon said: “We’d been told to expect no new policy announcements in the Chancellor’s first ‘Spring Statement’ and that’s precisely what we got.
“The updated forecasts of lower price inflation and a return to real earnings growth will have knock-on implications for future triple lock increases to the state pension. And there could be implications for final salary pension scheme funding which is impacted positively by lower price inflation but negatively by higher earnings growth for members who are still building up benefits.
“While Brexit is grabbing almost all Government’s attention, it’s still disappointing not to have heard even a little on other longer term Government priorities in a number of key areas. The Government announcement earlier this week that 10 million Brits can expect to live to age 100 is a stark reminder of just how important it is to tackle the issue of social care funding. A growing number of us will need some form of long term care in later life and funding implications are huge. To allow people to start planning for their share, the Government needs to advance urgently its proposals on how much the state will pay and how much individuals will need to fund for themselves.
“Similarly, while automatic enrolment means 9 million extra employees are saving for their retirement through workplace pensions, the self-employed are excluded. With the Chancellor saying the Conservatives are the champions for small businesses, we need new policies to stop self-employed becoming second class citizens in retirement.
“However, as we enter the new tax year, there are a raft of changes announced previously. These include the first increase to the pension lifetime allowance since 2016, increases in auto-enrolment minimum contributions, changes to tax bands, changes to income tax rates for those in Scotland, and cut in the tax free dividend allowance. For many, there will be benefits in seeking financial advice.”
Darren Redmayne, CEO of Lincoln Pensions, said: “As expected, the Spring Statement included positive news about the slowly improving health of the UK economy. This will be welcomed by the trustees of defined benefit schemes who are considering the strength of their employer covenant, and bodes well for the ability of their sponsor to provide additional financial support to their scheme.
“However, the recent return of equity market volatility has shown how the funding levels of pension schemes can change quickly, particularly for those schemes with higher risk investment strategies. This should act as a wake-up call for trustees to ensure that their sponsor really can support the level of investment risk in their scheme. We recommend trustees consider scenario testing, such as if a significant and prolonged market downturn were to happen in the future.”
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