Aegon: Six possible changes to look out for in next week’s Spring Statement

Photo of Steven Cameron
Steven Cameron, Pensions Director at Aegon.

Additional support for state pensioners

“After the government temporarily removed the earnings component of the state pension triple lock, state pensioners are due to receive an increase of 3.1% in April, based on the rate of inflation last September. This is far below the current rate of inflation.

“Setting the inflation component in September when the State Pension is not increased until April has meant the pension uprating hasn’t allowed for significant rises since September. While these should be reflected in the April 2023 increase, many state pensioners will be left struggling.

“We’ll be on the lookout for any temporary targeted support the Chancellor may grant. We’d welcome the Chancellor committing to a reinstatement of the earnings component in the triple lock from next April.”

Revisiting the pensions lifetime allowance

“The freezing of the pensions lifetime allowance at £1,073,100 until 2025/26 was one of a range of stealth taxes announced in the 2021 Spring Budget. By not increasing this in line with inflation, it is reducing the amount people can save in pensions in ‘real’ terms without facing an additional tax charge.

“The lifetime allowance was designed to limit the amount of pensions tax relief for the wealthy, but now it increasingly impacts many not so wealthy people, particularly those with valuable defined benefit pensions. Many more individuals could face an unexpected tax penalty as a result. We’d welcome Rishi revisiting this decision in light of current rocketing inflation, ideally by unfreezing the limit earlier than planned and returning to inflation-based increases.”

Helping the over 50s remain in or return to work

“At a time when all hands should be on deck to boost UK productivity and build back better, there’s an alarming trend amongst over 50s leaving the workforce. Worryingly, around half a million workers over 50 have left employment during the pandemic, meaning the government must take urgent action to make sure the UK doesn’t lose their huge skills and experience by making it easier for them to choose to return to the workforce.

“The government previously announced it was granting specific support to the over 50s following the end of the furlough scheme and we would like to see more detail and much more action here. This group face a particular challenge in returning to work, potentially requiring retraining or adapting to working in a completely new sector.

“It’s particularly important that those who do want to continue to work into their late 50s and 60s have the opportunity to do so. Many will have been relying on these later years to boost their private or workplace retirement savings and the State Pension doesn’t kick in until age 66, shortly to increase to 67. Continuing to work and save into a pension until State Pension age rather than starting to take a pension income as early as 55 can make a huge difference to an individual’s lifestyle in retirement.”

Enabling new forms of financial guidance

“There are growing signs that the government is ramping up efforts to take advantage of Brexit by reviewing rules we ‘inherited’ from the EU and replacing them with new approaches which work better for the UK and its citizens.

“Rules put in place at EU level mean regulations limit how much support firms can offer to those who are not prepared to pay for full ‘regulated advice’. We’d welcome changes here. Allowing more personalised forms of guidance alongside advice would free up firms to offer enhanced support to customers, not just to help them plan for their retirement, but when making other important savings and investment decisions.”

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