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Fiona Tait: Hammond’s Budget gift to long-term planning

Another year, another budget. Four and a half hours on a train to London, followed by square-eyed viewing of the live speech in case of any small furry rodents leaping out of the chancellor’s headgear and not a single mention of pensions. Thank you, Philip Hammond.

Previous budget speeches have introduced us to the Annual and Lifetime Allowances, the Money Purchase Annual Allowance, tapered Annual Allowance and a whole series of protected Lifetime Allowances from 2012, 2014 and 2016.

Famously in 2014 we had a budget to thank for the introduction of pension freedoms, flexi-access Drawdown and uncrystallised fund lump sums.

All of this was government, not industry-led. It’s no wonder therefore that we were all glued to our screens this week, or that we are all thankful for the respite, but most importantly this is good news for potential savers. No major changes to pensions means we can concentrate on long term planning and less on having to translate, digest and explain the impact of new rules on our clients.

Consumer understanding

The argument behind pension simplification was (and is) that people are more likely to invest in pensions if they understand how they work and, given the jargon-laden rules currently in place, frankly they don’t stand a chance.

It would have been wonderful if the chancellor has seen fit to remove some of the more unworkable complexities – the AA taper being top of the list – however this may have come at the cost of further restrictions.

At least if things stay the same people will have a reasonable idea, based on this year, of how much they can contribute to a pension and when they can use it. Constant change hinders understanding and creates mistrust, one of the biggest barriers to pension savings.

Catch up on all Money Marketing’s coverage of the Budget

Long term planning

No change also means that people can plan for the long term with more confidence. Pension planning is a long-term process and should not be at the mercy of short-term changes of direction.

Every time that someone invests in a pension in good faith only to find themselves subject to a tax or penalty that did not apply when they made the original saving, it further knocks the reputation of pensions.

How can we say to potential savers that they will be benefit from putting money in a pension if we don’t have any faith in what the eventual benefit will look like?

Clearly pensions strategy has to evolve, but it should be done as a result of research, consideration and consultation, not political points scoring. Fundamentally, when it comes to pensions we should not be hanging on the chancellor’s every word, or be at the mercy of pre-budget rumours about the abolition of the pension commencement lump sum each and every year.

If nothing else, a more inclusive approach makes it much harder for people to argue that they haven’t been told about any changes, although of course this might reduce the number of people available in the public gallery to laugh at Phil’s jokes.

Fiona Tait is technical director at Intelligent Pensions

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  1. This Budget was anything but long term. It all depends what happens over the next 149 days.

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