There was no industry consensus on the benefits and negatives of scrapping high-rate tax relief from this week’s 115 Pension Buzz peers in split results.
The question comes after reports that the Treasury has drawn up plans to slash the rate of relief for higher earners from 40% to 20% in a move that would free up around £10bn of government finances annually.
Buzz respondents were also asked their views on the reappointment of pensions and financial inclusion minister Guy Opperman, the auto-enrolment earnings trigger, and allocations to real assets.
This week's 115 Pensions Buzz respondents were split over whether or not higher-rate tax relief should be abolished. A total of 49% said it should not be, just ahead of 46% who agreed it should, and 5% who said they were unsure.
One respondent in the 49% said an abolition would "just be more tinkering with the system," adding that changing things without "a complete reappraisal of the reason why tax relief exists" would be "dangerous". Another said: "Any changes to pensions tax relief should take place as part of a co-ordinated review of pensions taxation generally."
A pundit who backed the abolition of higher-rate relief said it needed simplification, while another said there "is just no justification for giving higher-rate relief on contributions". Another added the scrap should only go ahead "if there's a guarantee that future pensions won't be taxed at a higher rate than the relief that applied".
Many respondents on both sides said a removal of the annual allowance would need to go alongside such a move.
Almost half (46%) of Buzz respondents said they had no plans to increase real asset allocations over the next three years. A further 43% said they were unsure, while 11% confirmed they were planning on an increase.
One pundit who said there were no plans to increase allocations to real assets argued they were too "high risk in the current climate" to justify. Another said their scheme would stay with allocations to index-linked funds due to their size, while a third said their focus was more on risk management now their scheme had achieved a sustainable level of funding.
Many respondents who were unsure over whether allocations would increase agreed it was dependent on the quality of investment opportunities available. One said: "There is too much dry powder at the moment." Another added: "Quality assets are very hard to come by."
More than a third (38%) of peers said their scheme planned to increase ESG investment a little in the next three years, while 14% said their increase would not be a lot, 10% said it would be drastic, and 10% had no plans to increase from current levels at all. More than a quarter (28%) were unsure.
One respondent who said ESG investment would increase by a little noted the change should be gradual rather than "a knee-jerk reaction to having to do something within a fixed period". Another agreed: "We will have a greater focus, but it's an evolution not a revolution."
A peer whose scheme's increase will not be a lot said ESG "should not be thought of as a target, but as an ethos" while another with the same response agreed "good fundamentals have always formed part of an investment strategy." Another questioned why it should be down to pension trustees to hold companies to account and said trustees "have enough to worry about without trying to solve the world's ESG problems".
A total of 68% of respondents supported the reappointment of Guy Opperman as pensions and financial inclusion minister following the cabinet reshuffle, citing consistency as the key factor. Yet, 8% did not support the reappointment and 24% said they were not sure.
One respondent in agreement said Opperman is "doing a decent job", while another agreed "he is really trying his best". A third noted that "high turnover in ministers has been a problem for the industry as a whole", while a fourth agreed the government should "try and keep one person in the job for more than a few months".
A peer who did not support the decision said Opperman did not fully understand pensions issues or the problems face by schemes, trustees and administrators. Another who was unsure added Opperman "needs to show more humility" while a further respondent, who said they were unsure of their support for Opperman, noted the pensions minister role "should be long-term" and "not just based on who is prime minister".
Close to half (45%) of Buzz peers said the government was wrong in its decision to not change the auto-enrolment (AE) earnings trigger and said it should be lower than £10,000. A further 9% felt the trigger should be higher, while another 9% were unsure.
More than a third (37%) said the government was right not to change the earnings trigger, however. One peer said most people earning under £10,000 "have a sufficient income replacement ratio anyway", while another said those earning less than the threshold should not be forced into an AE scheme.
One respondent against the government's decision and felt the trigger should be higher said it "should be aligned to the tax threshold". They added: "This will solve the anomaly of the lower paid not getting tax relief in trust-based pension schemes." Another who thought the trigger should be lower recommended a £1,000 reduction.
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