Johnson urged not to ‘neglect’ pensions following victory

The pensions industry has reacted to the election of Boris Johnson as leader of the Conservative Party, with one expert asking him not to 'neglect' the domestic pensions agenda in the UK.

Johnson won the leadership contest against Jeremy Hunt with 92,153 votes to 46,656 votes.

Royal London pension specialist, Helen Morrissey, urged the next Prime Minister not to neglect the domestic agenda on pensions.

“While Boris’s in-tray is likely to be straining under the weight of Brexit related issues there’s a domestic agenda that has been in limbo for far too long. We call upon the Prime Minister to devote some time to pressing issues such social care funding and the pensions bill which will allow the industry to make much needed progress with initiatives such as the pensions dashboard.”

Clara Pensions CEO Adam Saron congratulated Johnson on his win, and stated that he is looking forward to working with his government on improving defined benefit pension schemes.

“As Mayor of London, Johnson expressed his support for pension consolidation and its benefits and I hope this will continue during his tenure as Prime Minister,” he added.

Weighing in on what reforms Johnson might make to pensions, AJ Bell senior analyst Tom Selby said think’s Johnson’s promise to fix the pension tax crisis facing the NHS, could see him scrap the tapered annual allowance.

“The issue, caused by the tapering of the annual tax-free allowance for people with total earnings above £150,000, has added significant strain to already overburdened hospitals as senior doctors refuse shifts to avoid crippling tax bills.

“This complex fudge is unlikely to appease those affected, however, and while Johnson has not said how he will ‘fix’ the problem, scrapping the taper altogether would be the obvious solution...If Johnson does ditch the taper, however, he would blow a £1bn hole in the Treasury’s coffers which would need to be plugged.”

Barnett Waddingham senior consultant Malcolm McLean also believes the new government should address the tapered annual allowance, in order to fix the NHS pension crisis.

He believes the current consultation that proposes a 50:50 solution is not the correct path to resolve the issue. Under the proposals, clinicians can reduce their pensions accrual by 50 per cent, as well as paying 50 per cent lower contributions, a move which the government accepts “does not provide unlimited flexibility” and recognises that “some clinicians may continue to experience annual allowance tax charges”.

McLean said: “This is clearly not a complete answer to the problems being created by the high earners tapered annual allowance, and is unlikely to be seen by doctors as any sort of lasting solution.

“It is also the case that the annual allowance taper is now having an adverse effect on other highly paid key workers, such as air traffic controllers, for who flexible working patters and extra hours are an integral part of their jobs.

“In my view it is not in the public interest for this situation to continue any longer than absolutely necessary. The annual allowance taper should be scrapped and replaced with a slightly reduced annual allowance for all, say down from £40,000 to £35,000 per annum.

“The likely imminent arrival of a new Chancellor of the Exchequer should also be the catalyst for an urgent review of the whole system of pension tax reliefs and allowances, which as they stand now are not working well, are too complicated and are widely misunderstood and misapplied."

The impact of Johnson’s victory on the markets has been “fairly muted” so far, according to Janus Henderson Investors head of the UK-based multi-asset team, Paul O’Connor.

“The market response has been fairly muted so far, which is not surprising given how widely anticipated this outcome was. The pervasive uncertainty surrounding Brexit has already taken its toll on UK assets and is now somewhat priced in. UK equities have seen sizeable outflows from global investors since the referendum vote in 2016 and speculative positioning in sterling is very negative.

“If we look to betting markets as a guide to consensus expectations, we see a no-deal Brexit is a one-in-three chance, with investor dread of this being somewhat offset by the view that there is still a one-in-four chance that Brexit is cancelled (Article 50 is revoked). The perceived likelihood of a 2019 general election has been growing in recent months, highlighting another layer of uncertainty surrounding the UK outlook and yet another reason for global investors to stay away.”

Of the 160,000 Tory members eligible to vote, 509 ballot papers were rejected. A turnout of 87.4 per cent was recorded, with Johnson taking 66 per cent of the votes.

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