AE, net pay and the pensions dashboard - a Spring Statement wishlist

clock • 4 min read

The Spring Statement is likely to be overshadowed by Brexit but there is still much to do in pensions. Kim Kaveh and Holly Roach take a look at the industry's wishlist.

Philip Hammond's second Spring Statement which will take place today will be devoid of measures, as the Treasury confirmed in a tweet on 11 March, not to expect any big policy changes.

 The statement follows another Brexit defeat for prime minister Theresa May last night (12 March). Meanwhile MPs will be returning to the House of Commons today to vote on another significant Brexit motion, this time deciding whether Britain should leave the EU without the deal. So where does this leave pensions amid Brexit uncertainty?

Industry experts agree it would be very unlikely to see any pensions announcements come to light, yet some have provided a wish list of policies they would like to see enacted.

‘Dominated by Brexit'

Baroness Ros Altmann says she would be "surprised" if there is much of note on pensions in the Spring Statement. She notes: "The whole agenda is currently dominated by Brexit and what we will see as our future.

"I think there will be warnings of the impact of no-deal and promises of huge amounts of money for different things."

Others thought that if there were any pensions news from the chancellor, it would be more likely to be bad than good.

Willis Towers Watson senior consultant David Robbins says: "We've still got a lots of long-term spending pressures. The long-term picture is one where population is ageing and pressures are going to create demand for money which has got to be found from somewhere."

Meanwhile time commitments have taken away from, and extended, deliberations around pension matters. As Aegon pensions director Steven Cameron suggests, this includes introducing auto-enrolment (AE) for the self-employed, which will make a "huge difference to the futures of millions of individuals across the age spectrum long after Brexit".

Auto-enrolment

But, while it is clear that pensions will not be on the government's Spring Statement priority list, what would be on the industry's wish list?

Some commentators believe the government should make a clear commitment to implementing AE changes.

Smart Pension director of policy and communications Darren Philp says: "The government did a really good review of AE and I'd like to see a bit of commitment as to when the policies will be introduced, including lowering the earnings limit.

"Having some sort of firm commitment that the changes will be introduced by the end of 2021 or something like that would help to keep the momentum up behind AE."

MPs discussed lowering the lower-earnings limit in a Westminster Hall debate dedicated to the topic yesterday. But pensions and financial inclusion minister Guy Opperman noted there was "no question on whether the earning limit will be lowered, or whether the age limit will be lowered from 22 to 18, but the question is when".

In its 2017 review of AE, the government committed to reducing the lower earnings threshold and lowering the age of eligibility - but not until the mid-2020s. However last month Opperman rejected calls to speed up changes.

Other commentators agree that the government should make a commitment to AE changes, including The People's Pension director of policy Gregg McClymont, who says he'd like to see a "legislative commitment to extend AE to some of those private sector workers not currently covered by the scheme".

Royal London director of policy and external communications and former pensions minister Steve Webb further notes that the "last step up in AE contributions is next month, so it would be good to hear the plans, such as what happens after that".

AE contributions are rising to a total of 8% from 5% on 6 April. Before April 2018, total minimum contributions were at 3%.

Net-pay anomaly

Although he does not predict that this will happen, Philp would like the government to deal with the net-pay issue. He says he would "like to see a change in the way the tax relief system operates just to give those low-income individuals who don't get tax relief the opportunity to benefit".

He adds: "And carrying on with the same theme, we say it every year, but we need a system of tax relief that works, that is fair, is equitable, that rewards saving and doesn't sort of excessively benefit high earners."

Dashboard

It is also arguable that there needs to be an update on the pensions dashboards. Webb would like to see the chancellor make an announcement on this. He says: "We know it's going ahead, we know where it's going to be hosted, but what happens next and when?"

The aim of the dashboards is to allow consumers to have all their pension data in one place, making it easier to manage savings. The DWP announced last year it would begin with a single dashboard launched by the Single Financial Guidance Body but over time move to a multi-dashboard approach. Its consultation into the dashboard closed at the end of January.

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