Pensions changes in Budget 2024; the industry responds

by | Mar 6, 2024

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Money jar with pension written on

In the Spring Budget this afternoon, Chancellor Hunt announced a few changes to pensions. These included stating the commitment to the Triple Lock for the State Pension, some moves closer on the pot for life etc.

The Budget speech and supporting documents indicate that the Government is starting to cool on the idea of a ‘lifetime’ pension provider, as originally promoted in the Autumn Statement.

In the Autumn Statement speech, the Chancellor talked of consulting on a ‘legal right’ for people to divert their pension savings to a pension provider of their choice.  But in the Budget paperwork, the Government now says that it is simply committed to ‘exploring’ the idea.  It also says that it will only do this if it can ‘ensure’ that this will produce better outcomes.

The Red Book, at para 5.112 now says:


“The government has confirmed that it remains committed to exploring a lifetime provider model for Defined Contribution (DC) pension schemes in the long-term. The government will undertake continued analysis and engagement to ensure that this would improve outcomes for pension savers, and build on the foundations of reforms already underway, including the Value for Money Framework”  (underlining added).

Commenting, Steve Webb, partner at LCP said: “It is welcome to hear the first signs that the Government is thinking again about the idea of breaking up the current model of workplace pensions and replacing it with a ‘lifetime provider’ model.  From a heavily trailled announcement in the Autumn and talk of a new ‘legal right’, today’s Budget simply talks about ‘exploring’ the idea, and needing to be sure first that it would improve things for savers.  Once we see the full consultation response, where there was overwhelming opposition from consumer groups and industry experts, it is to be hoped that this idea will now be quietly dropped”.

Nick Flynn, Director of Retirement Income at Canada Life comments: “The State Pension is an incredibly valuable benefit for those fortunate enough to receive the full amount. If you are unsure what or when you’ll receive your state pension, it’s always worth asking for a free state pension forecast. This will not only confirm if you are on track to qualify for the full amount, but also tell you what your state pension age is. 


“This is also an opportunity, if you have gaps in your NI record, to consider whether you should pay voluntary contributions if you can, to close any gaps. Only the full 35 years NICs record will mean you receive a full state pension.

“Looking ahead, with the cost of state pensions increasing through the triple lock formula and in the context of the UK balance sheet, we need a proper debate on the future of the state pension due to the anticipated changes in our population.

“Improvements in life expectancy have slowed, and in many areas of the country gone into reverse. The ratio of state pension claimants to workers is expected to change significantly, and if we see this shift in the ratio of workers to retirees this will clearly have significant implications around any debate on the future funding of the state pension.”


Andrew Marker, Head of Retail Pensions, Vanguard, Europe, said: “We are encouraged by the UK Government’s commitment to give workers the choice to select their own pension provider. With the average worker in the UK expected to have 11 jobs in their working lifetime, it is likely they will accumulate several pension ‘pots’ with different providers. 

“Keeping track of multiple pensions is not easy and, in fact, 2.8 million pensions worth an average of £9,500 each are estimated to be lost or forgotten in the UK. The move would therefore be a step in the right direction which would give people greater clarity about their retirement savings. A ‘pot for life’ would allow individuals the opportunity to take control of their pension, making it easier to plan for the future and to ensure their savings are being invested with their future goals in mind. 

“What’s more, the move to one ‘pot for life’ would allow people to potentially reduce the annual percentage fee they currently pay for admin and investment charges, by combining multiple pensions into just one. However, to save on costs, there must be industry-wide transparency on fees as well as performance to ensure people can compare schemes and make the right decision for them.”


Kate Smith, Head of Pensions at Aegon UK, comments: “We’re incredibly disappointed that any mention of auto-enrolment enhancements was missing from the Chancellor’s Spring Budget statement.

“Having been announced as part of the 2017 Auto-enrolment Review, the longstanding plan has been to lower the auto-enrolment eligibility age from 22 to 18, as well as for workplace pension contributions to be calculated from the first £1 earned rather than on salary above £6,240.

“We’ve now been waiting almost seven years for these changes to be implemented, which at the current minimum rate of 8%, would see contributions boosted by £499 a year for millions of savers each year.


“It’s time to scratch that itch and get on and implement the reforms, enabling more people to save more into pensions from an earlier age. Delaying will only build up retirement income adequacy problems for the future.”

Commenting on the Budget, David Piltz, Chief Executive Officer for Gallagher’s UK Benefits & HR Consulting division (GBS) said:

“While investing in domestic stocks can be a beneficial way to unlock pension capital, and generate strong returns for savers, the requirement for DC and local government pension funds to publicly disclose their investments shouldn’t be the start of the government directing exactly where funds should be allocated.


“Although the Chancellor’s concerns around the performance of DC schemes, and his decision to bar poorly performing DC schemes from new business are valid, any investment decisions should be taken for financial reasons because individuals deserve a strategy that maximises the potential value of savings accrued by retirement. Any future initiative that encourages investing in UK-listed companies should remain voluntary, evaluated on a case-by-case basis, and preserve trustees’ fiduciary duty to their members.”

Tim Middleton, Director of Policy and External Affairs, at the PMI said: “We feel frustrated that the Chancellor has chosen to press ahead with the Lifetime Provider initiative. We noted earlier this year that this was the wrong time for an initiative such as this and are concerned at the disruption this could cause for so much of the good work achieved to date by automatic enrolment.”

“Whilst we remain supportive of initiatives that will increase investment by pension schemes in the UK economy, we are concerned at the implied suggestion that this would involve some form of coercion. We believe that trustees should retain absolute control of their investment policy and would like to see clarification of exactly what the Chancellor is proposing.”


“There were sound operational reasons for deferring the LTA’s abolition and we are disappointed that Mr Hunt has not heeded the industry’s concerns. It was frustrating to hear him discuss his reasoning in which he appeared to confuse the Annual and Lifetime Allowances. Unfortunately, this Budget represents both missed opportunities and an ominously authoritarian approach to those who manage the UK’s registered pension schemes.”  

Richard Parkin, Head of Retirement at BNY Mellon Investment Management, commenting on the Spring Budget, said: “UK pension funds started reducing their UK equity exposure over 25 years ago whittling down their UK holdings from 70 to 80% of equity assets to negligible holdings today. Indeed, many pension schemes’ equity holdings now track global stock market indices where the UK represents a paltry 4%. When we look around the world, we find comparable countries such as Australia and Canada still have a strong domestic equity bias despite relatively small stock markets.

“The Chancellor’s announcement requiring schemes to disclose their UK equity allocation will do nothing more than confirm what we already know, that pension funds generally have no bias to the UK. More direct action will be needed to bring about any real change and drive greater UK investment. Of course, governments dictating investment policy introduces myriad issues, but given the cost of pension tax reliefs to the UK exchequer many would argue that UK plc should see a larger share of these investments.”


“The triple lock has helped lift pensioner incomes higher compared to national average earnings but it’s not clear what the end game on State Pension is for either party. It seems this has become a game of “who blinks first” and any suggestion of reviewing the triple lock simply provides political ammunition to the opposing party. What we need is a clearer definition of what the policy is trying to achieve, how quickly it is trying to achieve it, and how funding it is prioritised against other tax and spending commitments. It seems somewhat incongruous that the government is committing to maintain a policy that increase the cost of the State Pension while simultaneously cutting the tax that notionally funds it.”

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