Pensioners gain more protection but there are costs for savers, and a return to meaningful interest rates looks to be further away than ever.
Ban on pensions cold calling
The Chancellor announced a consultation on banning pensions cold calling, but stopped short of actually introducing a ban as expected by many.
David Deidun, Partner at Quantum Advisory, said:
“Cold callers take advantage of vulnerable savers and pensioners who don’t fully understand the pensions system. We would welcome the protection offered by a ban on cold calling, but we would like to see it extended to cover texts and emails as well.”
Money purchase annual allowance
The Government is to consult on whether to reduce the amount someone can save tax-free into a pension, if that person has already withdrawn just a cash sum from a defined contribution pension, from £10,000 to £4,000 per year.
Stuart Price, Partner and Actuary at Quantum Advisory, said:
“This could reduce the pension savings allowance for some individuals to a very low level, and will require careful thought from anyone thinking of taking just a cash sum from their defined contribution pension while still working. Taking a lump sum for example to pay for a holiday, could severely restrict someone’s ability to save again into their pension for the rest of their working life.”
Salary sacrifice
The Chancellor announced that national insurance savings through so-called ‘salary sacrifice’ arrangements will be restricted to a select few benefits including pensions, childcare, bikes and low-emissions cars.
Stuart Price, Partner and Actuary at Quantum Advisory, said:
“It is good news that employee pension contributions to an employer’s pension arrangement can still be paid via salary sacrifice enabling both the employee and employer to continue making national insurance savings which help make saving for a pension more attractive.”
State pension triple lock
There had been speculation before the Autumn Statement that the Chancellor might scrap the ‘triple lock’ that links State pensions to the higher of earnings increases, CPI or 2.5%, but the Chancellor confirmed that this will remain until at least 2020.
Stuart Price, Partner and Actuary at Quantum Advisory, said:
“The triple lock offers very strong protection to pensioners receiving State Pension and maintains the value of their State pension over time, but many still see it as a way to buy pensioners’ votes which will become unsustainable in the long term.”
Economic stimulus
The Chancellor announced further government spending intended to stimulate the economy, but this is likely to keep interest rates low for longer.
David Deidun, Partner at Quantum Advisory, said:
“Savers and pension schemes continue to struggle with very low interest rates, and this looks likely to continue as the Chancellor tries to stimulate the economy. Likely price inflation caused by Brexit makes this year even more painful for savers and anyone on a fixed income.”