The Association of Consulting Actuaries (ACA) welcomes the Government’s overall approach to State pensions outlined in the Budget Statement, particularly the recognition that steps are needed to establish a higher single tier pension above which individuals can build a private pension more securely, and that the State Retirement Age must move automatically to keep pace with improvements in longevity, so the costs of State pensions do not rise too rapidly, threatening other calls on taxpayers’ resources. The decision not to tamper yet again with pension tax reliefs is also welcomed – this was essential as the major tightening in reliefs has not yet been bedded in and, as the Budget papers admit, amendments still need to be made, to make that regime at all workable (for all pension savers, not just those who are high earners). The Association fervently hopes that this is not simply a deferral of more tinkering as, at a time when Government is trying to re-invigorate occupational pension provision, a stable legislative and fiscal backdrop is desperately needed.
Commenting on the Budget, ACA Chairman, Stuart Southall said:
“For a number of years, the ACA has called for legislative reforms in the private sector that would allow employers to easily adjust pension ages as longevity improves without having to close good existing schemes. It is to be hoped the Pension Minister’s reinvigoration initiative (for workplace pensions) will address this issue in the next few months and we look forward to inputting to Government on how the longevity index will work. Private employers should not suffer tougher rules than those enjoyed by the State in such matters.
“On the down-side, putting an end to age allowances seems to have undermined the overall Budget package and it is to be hoped the Chancellor will reconsider this approach in next year’s Budget when, hopefully, signs of economic growth are more positive. As a minimum, he should think again during the passage of this year’s Finance Bill and look to maintain the current age 65 allowance for those approaching retirement until the personal allowance for all is raised to at least the same level (£10,500). Tax simplification is often talked about but rarely delivered and Government should not ignore the fact that many of today’s pensioners have suffered considerable hardship (in the form of massively more expensive annuities and negative real returns on their modest savings) because of corrective monetary policies arising from Government and personal over-borrowing of which they were not the cause.
“Whilst we can understand why the Government is ‘nationalising’ the Royal Mail pension fund, the strategy of moving the liabilities off-balance sheet and ‘snatching the cash’ thereby effectively passing on the substantial pension costs to be met by future generations of taxpayers is not one that should be seen as good practice. It’s an all too familiar approach echoing why our public finances are in the state they are. More puzzling to the private sector, will be why the Government should be allowed an effective ‘recovery period’ to meet the £10 billion deficit it has taken on from the Royal Mail of around 50 years. Private sector sponsors of pension schemes must wonder why the regulatory regime they are subject to is so much tougher – after all, many look more financially prudent than HM Government!”
|
