It is unlikely that we will see many completely new items appearing on the pensions landscape as the agenda is likely to have been set by the Chancellor earlier this year. However, there are two main areas where we may see updates following on from announcements made as part of the Spring Budget and Mansion House speech and some further loose ends which the Statement may provide clarity around.
Time to end the tax on the surplus?
The first is we could see a potential reduction to the penal 35% tax applied to Defined Benefit (DB) surplus refunds to align it with the normal corporation tax rate. This would be in line with the Government’s pro-growth stance by removing one of the disincentives to invest in growth focussed illiquid assets. As there has been limited upside for companies pushing their schemes into a surplus over the level required to insure the benefits, the tax has been far from a major earner for the Treasury. The removal of the penal rate of tax could be a smart move as it frees up schemes to invest, including in UK productive capital.
A delay to abolishing the LTA
Whilst we do not foresee the Government rowing back on this, the abolishment of the LTA faces potential implementation challenges before it makes it to the Finance Bill. The most likely scenario is that it is pushed back to 2025 providing more time for preparation but the clock is ticking given we could see a change of Government before then meaning a reversal could be possible if Labour win the election.
More to come on the DB Funding Code and consolidation?
With the new funding code due to come into force next year, there is still uncertainty around whether the industry’s requests for changes to avoid the requirement to reduce investment risk and to make it harder to keep schemes open will be listened to. The final regulations and code are expected to be released by early next year, changes in this direction could well be alluded to in the Autumn Statement.
Furthermore, as the inaugural Superfund deal was closed recently, there could be more announcements to promote DB scheme consolidation. This is likely to be echoed for Defined Contribution (DC) schemes, where the push for consolidation and improved value for money may receive continued backing.
Other options on the horizon include multi-CDC schemes after the initial launch of the Royal Mail’s CDC scheme but we are likely to see more work before multi-CDC enters the market as the need to de-risk remains a question.
LGPS to level up
It was made clear in the Mansion House reforms that LGPS will play a key role in levelling up across the UK. Following the pro-growth agenda this could be further firmed up by the Chancellor in his statement.
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