This month’s Retirement Strategy catches up with The People’s Pension, another new market entrant ahead of auto-enrolment, which is administered by construction industry pension specialists B&CE. The firm wants to compete with Nest and others at the low to middle end of the market and will charge a single AMC of 0.5 per cent that it forecasts will fall with scale.
Director Patrick Heath-Lay hopes B&CE’s experience with construction workers, whose average employment term is eight months, will put it in good stead to cope with the potential headaches of dealing with transient workers.
The run-up to March’s Budget comes with the usual predictions that the Government will look to further restrict higher-rate pension tax relief. However, the mood music appears significantly louder than usual, with the LibDems openly calling for cuts to help fund an increase in the income tax threshold to £10,000.
This may well be part of a Government market research/kite-flying exercise to judge public opinion but there is a strong feeling among industry and political watchers that a change could be on the cards.
IFA Adrian Pickersgill and the Trades Union Congress go head to head in this issue on the social effects of cutting pension tax relief. Pickersgill warns of the damage a cut could do to a nation which is already under-saving while the TUC warns the current system offers too much Government subsidy to the well-off.
You would hope it is highly unlikely the Government would look to revisit the messy and complex severing of higher-rate relief proposed by the previous Labour administration.
Cutting back on the tax-free cash benefit is unlikely to produce any short-term gain for the Government. It would not get away with applying such a benefit cut retrospectively and so could only reduce it for future contributions.
This leaves further cuts to the annual and/or lifetime allowance. Lowering the annual allowance to £40,000 would save £600m while cutting to £30,000 would save £1.6bn-£2bn.
Is this a cost worth paying to spread further instability through the pension system at a time when we are trying to get huge swathes of the population to put their faith in pensions for the first time?
It will go nowhere near raising the £9bn required to increase the income threshold to £10,000 unless the Government decides to once more lower the higher-rate tax threshold as a balance and incur the wrath of the politically prized “squeezed middle”.