Regular Retirement Planner columnists and other experts outline their wish lists for tomorrow’s Autumn Statement.
“The abolition of the tapered annual allowance and the money purchase annual allowance”
“There are a lot of complexities that have been added to pensions legislation over many years but the annual allowance restrictions are some of the most complicated that providers, advisers and clients have to deal with.
“The tapered annual allowance is probably the most complicated for any individual to deal with as they are usually unable to determine what their exact annual allowance will be until the end of the tax year in which they are supposed to pay it.
“In addition, every contribution paid impacts on the amount they are entitled to, so it is a vicious circle. By delaying contributions into the next tax year, so the member knows what the correct annual allowance is, it will impact on the annual allowance for the year in which it is paid, starting the whole thing again.
“The money purchase annual allowance is less complicated but just as irritating. It should be one figure for all, which should clearly be set for a long time to come to enable proper planning.”
“Quite simply – nothing”
“If I could talk directly to Phillip Hammond, I would plead with him to leave our current pension system alone and provide savers with stability and certainty. There are strong rumours we will see changes to the amount of tax relief given on pensions with potentially a flat rate of relief. But all this is doing is putting people off saving for the long term.
“It isn’t just those on lower incomes that are being put off, it is also the more affluent savers and, if they leave the pension system, innovation and developments are likely to slow down and we could see an increase in the annual costs of having a pension.
“Currently, consumer confidence is incredibly low and people aren’t sure that the pension products and features they buy today will still be available in five years’ time, with the same benefits and access.
“Without high levels of education or compulsion, we will never be able to encourage the levels of saving needed to ensure people have the retirement they want and expect. So, Phillip, please lead by example and encourage your fellow MPs to stop meddling with our pension system and instead let everyone have a system that is fit for purpose and all of society.”
“A planned cross-party, closed-doors pension commission”
“The government faces many challenges relating to pensions, both state and private. Increasing mortality, the lasting effects of quantitative easing and the lack of private pension provision, particularly for the younger and lower earners, all need to be addressed while balancing the costs and ongoing sustainability.
“With an uncertain economic outlook, now is not the time for teasing around the edges with short-term quick-fix semi-solutions. Nor is it the time for a radical change of policy. Instead I would like to see the announcement of a planned cross-party, closed-doors pension commission – as I discussed last week in Retirement Planner.
“This commission would research, in private, the underlying factors contributing towards the lack of engagement with pensions and not only propose solutions but consult with industry, economic and psychological experts to determine if the proposal is likely to meet the desired objectives. Only once a proposal is agreed and signed off right the way through development, education and delivery should it be released for public consumption.
“It is important we move away from the ‘kite-flying’ ideas that are seized upon by the national press but only confuse and disengage public opinion.”
“Scrap the unnecessary and overly complex Lifetime ISA”
“The Chancellor’s plans for the Autumn Statement likely changed direction when, last month, the IFS reported a £25bn hole in public finances by the end of the current parliament. Pensions will once again prove a highly tempting target to plug that hole but there is a far simpler cost saving that can be made immediately – scrap the unnecessary and overly complex Lifetime ISA and the accompanying increase of £20,000 to the ISA allowance.
“The Lifetime ISA is a complicated and restrictive concept, further muddying the once relatively simple ISA regime. Complexity and confusion are unlikely to stimulate increased saving in the target demographic, and the government’s cost estimate of £1.9bn for this product has already been called into question by none other than former pensions minister Steve Webb.
“The level of increase in ISA allowance also seems unwarranted. From a steady base of £7,200 in 2009, it is now due to rise from £15,240 to £20,000 in April 2017. The government estimates the cost of this increase to be £850m by 2020 – an increase that will have little to no impact on the people with the greatest need to save.
“Two simple steps that prevent needless additional complexity and deliver significant cost savings to an Exchequer under increasing pressure post-Brexit.”
“A definitive steer on where policy on pensions tax relief is moving”
“Speculation is always the watchword as we approach the Autumn Statement and, for that matter, the Budget. I do hope the mooted scrapping of the former happens as we seem to lurch from one deluge of changes to another. Let’s have all the stress in one go … or maybe not.
“There has been plenty said about fundamental changes to the operation of tax relief on pensions and it is probably fair to say there is growing agreement on the need for change. A definitive steer on where policy is moving in this area would be terrific – good for providers, yes, but better for clients, who deserve some certainty and stability around their future planning, which will include the ISA (all variants) and other savings vehicles too.
“And how about some simplification of the tapered annual allowance provisions? Clients often find it hard to assess what they can pay, as many are not entirely certain of their income levels until late in the day. Potential salary sacrifice changes from April 2017 have also created concern for providers, advisers and clients. A clear statement, one way or another, would be most welcome.
“Like every wish list, I could go on for some time. For now, I’ll settle for these.”
“A new framework to protect consumers from scams”
“We understand there may be an announcement regarding a possible ban on cold calling – something we would wholeheartedly endorse. Unsolicited emails, texts and calls are no way for legitimate companies to operate in the modern world and a ban would provide the legal framework that would prevent or deter scammers and would also highlight to individuals that someone ignoring the rules is in all likelihood up to no good.
“We would also welcome anything that tightens the rules for establishing and operating a pension scheme – perhaps a return to the regime that applied before A-Day, where schemes are submitted for individual approval. In the last few years we have seen many new entrants to the market, including a flurry of new master trust providers, which has led to the regulator being concerned about the lack of capital adequacy requirements for those schemes.
“HMRC reported a 42% drop in applications to register new pension schemes, from 6 April 2016 to 30 September 2016, when compared with the same period last year. Of those new schemes, 82% were registered, 7% were refused registration and 9% have had no decision made yet. While it is encouraging to see these statistics, which hopefully reflect instances where people are being protected, there is a need to do even more.”