Pensions - Articles - Barnett Waddingham reacts to Autumn Statement

 “The 2.9% increase in the basic state pension in line with the rise in earnings will no doubt be welcomed by many pensioners although the state additional pension (SERPS/S2P) is based on the current negative CPI figure and will therefore show no increase at all. The net effect will mean that for many pensioners the total increase in their pension will be substantially less than 2.9%.

 “The £155.65 per week rate for the starting amount of the new single tier state pension from next April is probably the least it could have been given the increase to the pension credit threshold to £155.60 per week. This is a mere five pence above the minimum income guarantee level and will not preclude an overlap with all means tested benefits as the government had previously implied. It will therefore not necessarily provide an incentive for people to save privately, bearing in mind that in the early years less than half of the recipients will receive the full rate of the new state pension anyway.

 “The alignment of the next two phases of minimum contribution rate increases for auto-enrolment will now be linked to tax years. Instead of the increases taking place in October they are to be delayed until April the following year. It is claimed that this has been done to simplify the administration of auto-enrolment for the smallest employers but it does of course effectively mean that individuals will not see the benefit of increased contributions into their pension schemes for another six months.

 “If the system of tax relief is to remain unchanged, it is understood that it is likely to result in a saving of £390million in tax relief costs in 2017/18 and £450million in 2018/19 which the Chancellor will no doubt gratefully receive. The delay may however also indicate a continuing nervousness by the government as to the level of opt-outs from workers in small employer schemes. It further suggests that the government is not planning to require an early increase in the level of minimum contributions to assist members securing better outcomes from their pension savings as many commentators have suggested is necessary.

 “I look forward to the full Budget in Spring 2016 with some trepidation as to what else the Chancellor has in store for pensions.”