Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group said: “The Chancellor has remained true to her principle of sticking to one fiscal event per year and for many, it’s ‘as you were’ following the Spring Statement. However, the squeeze on the public purse is clear and it seems the stage is set for a more significant Autumn Budget. With formidable spending obligations and a firm stated commitment to obey its fiscal rules, unless we see a strong summer of economic growth the Government is likely to face a choice between further spending cuts and tax rises. It remains to be seen whether the Government’s pledge not to increase taxes on working people can survive the scale of the fiscal challenge outlined by the OBR. In the meantime, people should continue to make the most of the allowances on offer via tax efficient products like ISAs and pensions to maximise their take-home pay. There may be temptation to tinker around the edges and the reality is even apparently minor changes to the tax system, for example the plans to bring pensions into scope for Inheritance Tax (IHT) outlined at last October’s Budget, can be incredibly complex and raise issues around practicality. The IHT proposals have fundamentally altered how many better-off savers view their pension, and four in five (82%) financial advisers are now re-evaluating the role of pensions in client planning following the announcement1. With the majority of UK adults undersaving for retirement, it’s crucial that policy around long-term saving serves to increase confidence in the pensions system.
“The other major event this year is the Pension Schemes Bill where we are expecting a first draft within weeks. Previewed at the King’s Speech, the Bill will contain a number of significant developments designed to address pressing issues facing savers and the industry. The big-ticket initiative is the Chancellor’s drive for scale and a plan to consolidate the fragmented DC pension market into fewer, larger schemes to drive efficiencies and unlock investment opportunities both here in the UK and internationally. Another significant development is a plan to introduce default decumulation pathways in the occupation pensions world. We’re ten years on from the pension freedoms and in many respects this plan recognises that complexity of the decisions facing those at retirement and aims to provide an option that will deliver good outcomes for those who would prefer a ready-made solution. A scheme to address the issues of small pots is also in the works which recognises the proliferation we’ve seen since the introduction of auto-enrolment with the introduction of default consolidators. Despite pensions barely featuring in today’s statement, both parliament and the industry will be kept busy in the weeks ahead as this legislation progresses!”
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