Nigel Peaple says the government should set a clear objective for tax relief as the first step in making the system work better for savers
Budget statements are unsurprisingly preceded by great anticipation given the plans outlined in them inevitably have wide-reaching consequences for all sectors of society.
The pensions industry is not exempt from this. So this time around, we all wanted to hear whether or not tax relief would be cut. Fortunately, this wasn't the case.
However, that wasn't the only thing we didn't hear. In fact, pensions didn't actually feature in the chancellor's speech at all. While it's positive to have some consistency and stability for the sector, there were some positive pension announcements which were unfortunately buried in the Budget's many pages.
One of the key announcements we uncovered was on the pensions dashboard. In our Hitting the Target report, we explained just how important we felt this project to be - alongside the introduction of new retirement income targets - and how it can be an essential tool that will help savers plan their retirement income. To have a system in place that will for the first time allow an individual to see their pension pots, including the state pension, in one place, could be a vital tool in helping people plan for retirement.
We are therefore pleased the Budget confirmed the Department for Work and Pensions (DWP) will consult later this year on the dashboard including the state pension, and we are eager to work with the industry to make the project a success.
The Budget also touched on ‘patient capital'. In the Autumn 2017 Budget, it was announced an action plan was being set up to unlock £20bn of finance for innovative high-growth firms, and established a taskforce to address the barriers to pensions investment in ‘patient capital'. This Budget moved the issue further forwards and the government has said through the British Business Bank, it will support pension funds to invest in growing UK businesses.
We believe it's essential that all schemes can access a wide range of investments to allow them to diversify in times of uncertainty and low interest rates.
The Pensions and Lifetime Savings Association (PLSA) has been a part of the recent work by government to improve schemes' access to more investment opportunities, and we are pleased this work has helped shape the chancellor's plans.
Finally, the Budget also set out plans to help savers avoid falling prey to pension scams. The government stated banning pension cold-calling can help protect savers from fraudulent activity and that it will soon implement legislation to make it illegal. This would ban companies from calling savers unexpectedly to discuss the value of a pension or what they plan to do with it during retirement.
While this is a welcome first step, it is far from conclusive. The ban falls short of addressing the central problem; being a registered pension scheme is not proof of being a legitimate scheme. We believe the cold-calling ban will make life more difficult for scammers, but it is not a silver bullet.
It's our belief that a much tougher approach is required to stop rogue firms entering the market and to tackle those using existing schemes as a vehicle for their activities. To that end, we continue to propose an authorisation regime for pension schemes, with a light-touch approach for the lowest risk schemes.
Looking to the future, the PLSA will continue to monitor the government's approach to pensions; both in the scope of this Budget and future ones.
So while there have been no tax relief cuts in this Budget, we'd now like to see the government set a clear objective for tax relief as the first step in making the system work better for savers. We believe the right objective would be to help as many people as possible achieve an adequate retirement income, and then any future changes to tax relief should be made in line with this objective.
Nigel Peaple is director of policy and research at the Pensions and Lifetime Savings Association
The European Court of Justice (ECJ) will deliver its judgment next month in a landmark case on whether pension lifeboat funds are paying out the right level of benefits.
The Conservative party will hold reviews of the tapered annual allowance and net-pay schemes if it is elected back into government, it has said.
Registration for the UK Pensions Awards 2020 is now open…
This week’s top stories included Aon telling the industry there was no excuse for stalling implementation of GMP equalisation, despite further guidance being needed on tax.
Legal & General (L&G) has launched an online annuity searching tool, allowing consumers to compare rates across six leading providers.