Caitlin Southall, Pension Technical Manager, Curtis Banks comments on her 5 key expectations of the Autumn Statement.
- Triple lock
The Triple Lock policy is unsustainable and intergenerationally unfair. It’s difficult to see Jeremy Hunt maintaining the policy as it is currently due to the significant cost to the Treasury. The policy may be reformed to amend the existing increasing factors, perhaps with a move to limiting the increase for the next tax year to exclude bonuses. This would save the Treasury tens of millions of pounds without wholesale reform to the policy, although it is worth noting that wholesale reform for the Triple Lock is needed to create a more sustainable model for future generations.
- The Lifetime Allowance Abolishment
The abolishment of the LTA should be delayed to 2025 in order that structured, comprehensive and understandable legislation can be introduced to deal with the removal of the LTA. The LTA is inextricably linked with a number of other key pension legislation, so its removal is a mammoth and complicated challenge to overcome in a very tight timeframe. Delaying the abolishment to 2025 would allow more time and consideration to be given to ensure that pension savers are not disadvantaged and that any new rules are suitable and sufficient. I would argue that at its very core, the Government have already achieved their main goal with the LTA abolishment with the removal of the LTA charge (abolished in April). The charge was there to deter people from saving too much into their pension, however if they are charged marginal rate for any savings over and above this, then this effectively delivers what they are trying to change without the need for complicated allowances and rules.
- Inheritance Tax
IHT affects less than 4% of estates, yet for a tax that affects so few, it is widely despised. Removing IHT would be a political shot-in-the-arm with a looming General Election. From a pension perspective, clients can already pass their SIPP or SSAS wealth to future generations in a tax efficient way, however should IHT be abolished, all the careful tax planning already undertaken by savers nearing retirement would need close review to ensure that appropriate long term plans are in place to minimise tax payable on their passing.
The extension of AE legislation was a huge step forward for pension saving in the UK and in a turbulent year for the industry and pension savers, it went a little under the radar against the backdrop of the LTA abolishment and annual allowance increase. Opening the door for more people to save towards their retirement is only a good thing and will enable more people to save towards their retirement. Labour have intimated that if they are successful at the General Election that they will look to increase the minimum contribution level from 8% to 15%. Jeremy Hunt may look to follow suit, although we would be surprised to see that significant jump and a more realistic outcome may be that the minimum contribution level if raised would be increased to 10-12%. I would hope to see Jeremy Hunt to explain how the auto enrolment extension will operate for employers and savers and a timescale for this. It’s vital that the Government don’t miss the opportunity to allow people to be more engaged with their pensions at the outset of their working life through supplemental activity around pension education.
- Mansion House Reforms
I think we will see more detail from the Autumn Statement around the Mansion House reforms and how they will operate in practice. Jeremy Hunt will need to make clear that they are not risking the pensions industry in order to revitalise a struggling economy, and outline the governance, controls and opportunities that are on offer via private equity investment. We may see tax benefits announced to incentivise pension investment in private equity, and we may also see corporation tax changes to allow corporate investment in that asset class.