Key regulatory and legislative developments are set to impact the UK personal finance, pensions, and financial planning sector this October. AJ Bell’s Tom Selby and Rachel Vahey outline crucial deadlines, including consultations on pensions, state pension age, and the Financial Ombudsman Service, alongside their push for a Pension Tax Lock to protect long-term savers.
Key things to look out for in October:
Ø House of Lords Finance sub-committee’s call for evidence closed on 7 October: the sub-committee was looking for evidence and commentary on some Finance Bill clauses, including those that relate to extending IHT to include pensions.
Ø FCA and HM Treasury consultations on Financial Ombudsman Service (FOS) and Redress Review closed on 8 October: including proposals to improve the FOS and introduce a framework for mass redresses.
Ø HM Treasury ‘Budget Representation Portal’ closes on 15 October: this is an avenue for stakeholders and interested parties to feedback comments on existing policy for consideration in the Budget.
Ø FCA consultation CP25/26 on Targeted Support closes on 17 October: the FCA are consulting on some small changes to its handbook as a result of introducing targeted support, and firms are now able to log their interest in applying for permission to offer targeted support.
Ø Pension Schemes Bill continues passage through Parliament: the bill is expected to have its report stage and third reading this month, as well as the Public Bill Committee publishing its report on the bill on 23 October.
Ø DWP’s call for evidence on state pension age review closes on 24 October: the government launched its third review of the state pension age in July to assess what factors government should consider in determining the state pension age.
- Petitioning government to commit to a ‘Pension Tax Lock’
- AJ Bell has launched a parliamentary petition demanding government commit to retain key pension tax incentives, for at least this parliament – you can view/sign the petition here
- This Pension Tax Lock will put an end to damaging speculation over the future of pension tax-free cash and pension contribution tax relief
- The government will be required to respond once the petition receives 10,000 signatures
Tom Selby, director of public policy at AJ Bell, comments:
“For decades, pension savers have entered a pension tax pact with the government, where they sacrifice take-home pay for the long term by paying into a pension scheme, on the proviso that they will be taxed on payments in retirement, as well as receiving a 25% tax-free lump sum.
“This way government encourages people to save for their financial future, but also to alleviate the state burden for future governments and taxpayers.
“That is the foundation upon which the retirement plans of millions of Brits are built. It requires a firm commitment to stability from government, matching the long-term financial decisions of savers preparing for retirement. It should not be subject to endless speculation that government may move the goalposts before pension savers can access their money.
“Committing to a Pension Tax Lock would show the government is serious about a fair deal for workers, allowing today’s savers to enjoy the same pension tax incentives as their parents. It would also lay down the gauntlet to any future government tempted by a pension tax raid, offering genuine security to savers through a policy commitment that doesn’t require any increase in government spending.”
- Could the third state pension age review spell the beginning of the end for the triple lock?
- The Department for Work and Pensions (DWP) call for evidence on the third state pension age review closes on 24 October
- Required by the Pensions Act 2014, the review led by Dr Suzy Morrissey will consider whether the rules around pensionable age are appropriate based on the latest life expectancy data and other evidence
- A second report from the Government Actuary’s Department (GAD) will consider the latest life expectancy projections data
- Government may be told to accelerate plans to raise state pension age to 68, although it isn’t forced to accept recommendations
- Concerns over affordability could create pressure to consider reforming the triple lock
Rachel Vahey, head of public policy at AJ Bell, comments:
“An increase to state pension age from 66 to 67 is already slated to happen between 2026 and 2028. But it’s less clear what will happen after that. There is also an increase to age 68 pencilled in for 2046, but a faster increase is definitely on the cards. The first two reviews of the state pension age advocated bringing this forward, but successive governments have treated the issue like a hot potato.
“This latest state pension age review, however, may eventually force the government’s hand. State pension benefits are one of the single biggest expenses for the Treasury and account for more than 80% of the £175 billion pensioner welfare bill. Without policy intervention, state pension costs are set to spiral to nearly 8% of GDP over the next 50 years based on the current trajectory, up from 5.2% today*.
“The second state pension age review in 2023 recommended that the increase to 68 should be introduced between 2041 and 2043 to help reduce costs, although the government under Rishi Sunak opted not to commit to that timetable. However, the new Labour government may feel it needs to consider the rise to age 68 more closely, particularly if it wants to demonstrate steps toward long-term fiscal prudence.
“The new state pension age review will look at key factors such as linking state pension age to life expectancy and its fairness between generations, as well as its role in ensuring the state pension’s long-term sustainability.
“An ageing population places an increasing burden on taxpayers, with state pension costs rising and fewer working age taxpayers to cover the cost. Future governments will hope that an improved economy and growing tax receipts will help alleviate some of the pressure. But that can’t be guaranteed and there needs to a be a credible plan for maintaining affordability.
“One option is to raise the state pension age higher and faster than currently planned. Although the elephant in the room is that the state pension age is just one lever government has to help manage the cost of the state pension – the other is reforming the triple lock.”
