Commenting on the challenges facing a new PM and their Chancellor when it comes to savings and pensions issues, Jenny Holt, Managing Director for Customer Savings and Investments at Standard Life, part of Phoenix Group said:
“With the current challenges of rising living costs pensions and savings will understandably not be top of the domestic agenda for the incoming PM. However, there are significant trade-offs to be made in balancing short-term crisis management and long-term financial wellbeing.
“We’d like to work with the government, employers and peers to support people as much as we can during this period while continuing to work towards a pension model that works for all. Compared to the immediate consequences of double-digit inflation they may not seem urgent, but there are a number of issues facing our industry that the new PM will need to address.”
The pensions Lifetime Allowance becomes more contentious with reports of NHS staff retiring early
“In last year’s Spring Budget Chancellor Rishi Sunak froze the pension lifetime allowance at £1.073m to 2026. Since then, inflation has spiralled to double digits and the real value of what people can save in their pension without incurring tax charges has fallen significantly.
“The impact of this policy has been most controversial when it comes to NHS staff. Reports suggest many doctors and other senior staff are choosing to retire early given the potential tax bills they could face for continuing to work and pay into their pension. At a time when NHS waiting lists are high, this is a particularly contentious policy.
“The effects of the policy are not just limited to the NHS and middle to higher earners who have saved diligently over the years could all be caught out. With those approaching retirement seeing costs rise, many will be looking to ensure they are adequately prepared for the type of retirement they’d envisaged but the reality is, the real value of what they’re able to save is being cut.”
“Throughout the leadership race both candidates demonstrated their commitment to reintroducing the state pension triple lock which was downgraded to a double lock this year. We also support this. The rationale for this year’s downgrade was that distortions to earnings during the pandemic would have given pensioners a bumper increase at a time when many people of working age had seen their earnings reduce during the pandemic. Now however, pensioners can expect an increase of around 10% next year, with September’s inflation figure set to determine the increase in payments. If this comes to pass, we’ll see the new state pension valued at more than £10,000 a year for the first time.
“The state pension currently costs the government around £100bn** a year, so a 10% increase will be equivalent to around £10bn making it a sizeable commitment.”