Long read: Industry shares pensions 'wish list' ahead of Autumn Statement

Industry experts have suggested that the government will have “a lot to say on pensions” in the Autumn Statement, with further updates expected on a number of key initiatives, including the Mansion House reforms and the removal of the lifetime allowance (LTA).

Industry experts previously expressed disappointment that the King's Speech failed to make any mention of pensions, despite hopes that the government could be set to introduce a new Pension Schemes Bill to progress the Mansion House reforms.

However, the industry has now placed its hopes on further updates in the Autumn Statement on 22 November, with Isio head of research, Iain McLellan, suggesting that this could provide "a second bite at the cherry".

Agreeing, Hargreaves Lansdown head of retirement analysis, Helen Morrissey, suggested that while the King's Speech was a "damp squib" when it came to pensions, there may still see movement on these issues in the Autumn Statement.

Progressing the Mansion House reforms

The Mansion House aims, in particular, are expected to appear in Chancellor's update, after the Treasury previously confirmed that the industry should expect to hear more on the push to encourage greater investment in the UK economy in the upcoming statement.

PensionBee director of public affairs, Becky O'Connor, suggested that a further update on the Mansion reforms would be timely, as the industry expects - and needs - more detail on how the Mansion House reforms will work in practice.

"As things stand, we don’t think the plans demonstrate clear benefits to all pension savers and want to see concrete proposals that make retirement outcomes the top priority, above the benefits to the UK economy of using pension money to fund investment," she continued.

“Specifically, the government should take the opportunity of the Autumn Statement to address concerns that pension fund investments into UK illiquid assets would be subject to higher fees.

“To make the plans more attractive for everyone, savers included, it would be good to hear that further tax incentives for pension funds investing in UK private equity could be on the cards and also that fees for this type of investment will be negotiated down from their current, relatively high levels."

Adding to this, Pensions and Lifetime Savings Association (PLSA) director of policy and advocacy, Nigel Peaple, said that an improved pipeline of assets is also needed, "not least an expanded role for the British Business Bank to enhance the supply of investible UK growth assets at reasonable cost".

“Investment in the UK will be more likely to attract pension fund interest if the government provides fiscal incentives that make investing in the UK more attractive than investing abroad," he continued.

“There is also a need to revise the funding regulations for defined benefit (DB) schemes in order to encourage more investment in growth assets while maintaining appropriate safeguarding of member benefits."

Hymans Robertson partner, Laura McLaren, shared this sentiment, arguing that the industry needs clarity, and soon, on the DB Funding Code, so that decision-making isn’t stifled.

"Trustees and sponsors are in a difficult position, with the tough job of trying to plan for new rules that are still unclear," she said, warning that, if left unchanged, the new code could heighten systemic risks and negatively affect open schemes.

"We’d prefer more flexibility for trustees and sponsors to make the right investment choices for their schemes," she said.

Alongside DB updates, Aegon pensions director, Steven Cameron, suggested that the Chancellor could announce the next steps around encouraging defined contribution (DC) pension schemes to invest more in private equity.

“We expect an update on next steps for the proposed DC value for money framework which will bring in standard metrics on investment performance, charges and customer service standards," he continued.

"Introducing new variations of Collective Defined Contribution pension schemes, with a structure more suited to investing in private equity, is also likely to feature, as is offering members of trust-based schemes a wider range of retirement choices and support.

"The July proposals for dealing with the many millions of ‘left behind’ small deferred pension pots of under £1000 proved controversial but again, we expect an update on latest government plans."

Putting the AE Bill into action

There are also a number of broader initiatives that industry experts are also hoping will appear in the Autumns Statement, including further improvements to auto-enrolment (AE), following the news that a bill to extend AE received Royal Assent earlier this year.

Peaple stated: "We hope the government will not only publish the regulations to implement higher automatic enrolment contributions by introducing pension saving from the first pound of earnings, as adopted by parliament earlier this year, but they will also commit to setting a roadmap to increase pension saving from 8 per cent to 12 per cent gradually over the next decade.”

Adding to this, AJ Bell head of retirement policy, Tom Selby, acknowledged that the cost-of-living crisis will present a "big challenge" in implementing even this minor expansion of auto-enrolment.

However, Selby admitted that there may never be an easy time to increase auto-enrolment contributions, arguing that "it is vital the government grasps the nettle by setting a clear, ambitious timetable not just to introduce these changes, but to increase contributions over the next decade as well".

DC decumulation is another area on a number of industry wish lists, as Hymans Robertson partner, Kathryn Fleming, said that the government needs to outline clear action to solve the decumulation puzzle facing both DC scheme members and trustees.

“The key channel to achieve this will be through establishing a ‘broad alignment’ amongst what is offered by different providers, compelling them to provide decumulation solutions for their members through all pension schemes," she stated.

Calls to clarify LTA changes grow

A number of organisations have also called on the government to use the Autumn Statement as an opportunity to provide further updates on the removal of the LTA, following concerns that the changes threaten to “backtrack” on the ability to inherit pension pots tax-free.

Indeed, Selby argued that while the decision to scrap the LTA had the potential to be a hugely positive step in making pensions simpler for millions of people, "the government is in danger of undoing its good work by creating a horribly complex new set of rules savers will be forced to navigate".

"What’s more, HMRC has also indicated its intention to hit savers with new pension ‘death tax’ where someone dies before age 75," he continued.

Given this, he argued that the government needs to "urgently" clarify how pension assets will be treated on death, so advisers can help their clients make informed decisions.”

O'Connor agreed, stating that "there are some real complexities in the transitional arrangements and clarification over these would be welcome".

State pension - a political balance

Some in the industry have suggested that the state pension could also appear in the Chancellor's speech, as Selby suggested that the Chancellor may look to "deliver a slice of positive news during these straightened times, he may want to use his speech to confirm an 8.5 per cent state pension increase for 2024".

Concerns around the cost of the state pension triple lock have placed growing pressure on the government, as Cameron pointed out that the recent fall in inflation means that an 8.5 per cent increase could be more than double the ruling rate of inflation come next April.

However, O'Connor agreed with Selby, arguing that while there is a case to reform the way the triple lock works, given a looming general election, it seems unlikely the government would do much to upset any current or potential voters.

"The imminent need to win votes usually means a ‘hands-off the personal finances’ approach - or even big-ticket giveaways to attract voters," she stated.

“As the cost of living continues to affect people’s daily lives, the government will want to throw the kitchen sink at measures that sound like they might benefit people’s finances now and in the long term, even if in practice, the real-world positive impact of the move may be minimal."

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