Budget measures will help support savers achieve adequate retirement income
The Pensions and Lifetime Savings Association (PLSA) comments on the pension measures announced in the Spring Budget.
Nigel Peaple, Director of Policy and Advocacy at the PLSA, said: “The pensions tax relief system provides crucial support for people by boosting their savings over the long term. The PLSA has long argued that tax relief is needed to encourage behaviours which help more people achieve an adequate income in retirement.
“Increasing the Lifetime Allowance, Annual Allowance and Money Purchase Annual Allowance will encourage older, often highly skilled or experienced workers, including senior doctors, to stay in the workforce and provide more flexibility for retirees to re-enter the world of work. These changes will also allow additional scope for savers to contribute lump sums, perhaps from an inheritance or a redundancy payment, into their pension to meet any shortfalls before they retire.
“While these changes to tax relief will be of most value to average and higher earners, it is positive that the Government today did not bring forward the date at which the State Pension Age would rise to 68 as has been speculated on in the media. Many people, especially those on lower earnings, rely heavily on the State Pension for their retirement income. Increases in the State Pension fall disproportionately on people on lower incomes who generally have poorer longevity. We welcomed the Government’s recent decision to introduce a 10% rise in the value of the State Pension from next month, in line with the Triple Lock.
“The Government’s recent support for new legislation that enables increases in the amount of automatic enrolment pension saving will also help people on lower and average earnings. We believe the Government should go further in this regard by gradually increasing pension contributions in the late 2020s and early 2030s so that they rise from 8% to 12%, with a larger share of the increases falling on employers, so that in future pension contributions are split evenly between the employer and employee.
“The Government has made clear that it wishes to find ways to encourage private sector pension funds to invest in the UK. We have worked with the Government on this issue in the Productive Finance Working Group and look forward to contributing to their further work in this area, both on the LIFTS initiative, and on any broader proposals planned for the Autumn Statement. We note that the Government also plans to consult on whether to further consolidate the investment pools that operate in support of the Local Government Pension Scheme. As it is only five years since the first pooling reform which set up eight investment pools to serve the around 90 local authority pension funds in England and Wales, we think a further large-scale reform would be unlikely to achieve very much at this time.”