I know, I have prayed for calm in the pension world for such a long time that I shouldn’t be upset or feel left out as my tax and trust colleagues are busy writing stuff down (although even they were light on work this year), but I was.
As ever though, we will see a few changes having an impact on pensions in a roundabout way. Firstly, there is the change to the personal allowance which, as was quickly pointed out, would impact those in a net pay pension scheme who are low earners.
Here we are usually looking at auto enrolment schemes, where the employer takes the employee pension payment from their pay before calculating tax. This is great for those who would have to go to the effort of claiming back higher rate relief but for those that don’t pay any tax they are missing out on a free uplift of 20% into their pensions, that they are entitled to.
This may seem fair that those that don’t pay tax, don’t get tax relief into their pensions. But if the scheme was set up on a relief at source basis then the member would get 20% added to their contribution, which could easily make a difference over a 40 year savings period.
The other thing we saw was the publication of the Patient Capital Review, which was a review on how to get more investment into patient capital. This review was conducted by a number of well known investment experts but I didn’t see a single pensions specialist on the panel. One of their suggestions was to make the annual allowance or even the lifetime allowance dependent on the investments the pension held. Madness in my opinion, but I’m no investment expert.
We have enough problems with the varying levels of annual allowance and lifetime allowance we have to deal with now, let alone linking it to underlying investments as well. I can only hope this suggestion is ignored or I will have to learn more about investments, just as I have about taxation of income for the tapered annual allowance calculations.
So, although it wasn’t a pension budget, I am sure we will see a few other knock on effects as the legislation and consultations progress through. Time will tell whether there is a sting in the tail.
Claire Trott is Head of Pensions Strategy at Technical Connection