SJP: Budget offers no long-term solutions for pensions

Westiminster houses of parliamentPension measures in yesterday’s Budget confirming banning cold-calling and raising the lifetime allowance are only small solutions for larger problems, according to St James’s Place.

The advice giant responded to the fairly quiet Budget for the pensions sector by noting that no proposed solutions are long-term.

SJP head of pensions strategy Claire Trott says news that the tapered annual allowance will not be scrapped and that contribution rules will not be simplified in general is a disappointment for the industry.

She says: “We had hoped that there would be some good news for low earners in ‘net pay’ pension schemes who are still missing out on up to £780 per year on tax relief, that those in ‘relief at source’ pension schemes currently receive.

“This could have been an easy win for the Government to encourage lower earners to boost their pension savings within auto enrolment schemes.”

Chancellor Philip Hammond says a long-awaited ban on cold-calling will come into force once final regulations on the issue are laid down before parliament this Autumn.

Budget 2018: Cold calling ban to hit IFAs using lead generators

Trott says the progress is positive but not a long-term solution.

She says: “This won’t stop pension scams, although anything that can be done to stop even one person losing their hard-earned pension is worthwhile and this has been a long time coming.

“We all need to remain vigilant to changing scams and pension schemes themselves need to be at the forefront and protect their members as best they can.”

The rise in the lifetime allowance to £1,055,000 was also confirmed in the Budget.

The increase was slightly more than expected, with the figure initially planned to increase in line with September’s figures for the Consumer Price Index to £1,054,800.

Trott notes the news follows mounting fear that the allowance would be cut to help raise the tax taken on pensions at retirement.

Budget 2018: Lifetime allowance nudges up as Hammond bucks pension tax reform rumours

She says: “Again, had this been changed, more trust in pensions would have been lost at a time when company pension scheme members are on the rise because of the success of auto enrolment.”

With no wider changes to the pension legislation outlined however, Trott says the pensions sector can look forward to a “much-needed period of calm.”

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  1. What a monocular view of retirement planning. What of ISAs? No tax relief up front, but no tax on the yield. Bonds. Tax deferred for 20 years. So retire at 70 and who gives a toss about tax at 90. If you are daft enough there are also VCTs. There are in fact loads of other (or additional) ways to save for retirement. Some of which are more tax efficient at receipt. Remember that pension tax relief is only loaned money, although PCLS is useful.

    • Yes, but a 20% leg-up on contributions at the start of the journey gives saving via an approved pension plan an advantage over pretty well anything else that cannot be beaten. Prudential has done the sums on saving via an ISA vs. a pension and the pension wins every time, even allowing for tax on three quarters of what’s withdrawn upon eventual vesting.

      My main gripe is with maintaining the LTA, because the fund of anyone starting out at a young age, even on quite modest contributions, will approach it decades before their anticipated retiring age. You only have to look at the inflation-adjusted projected funds on most illustrations and compare them with the current LTA for this to be apparent.

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