Courtiers Wealth Management
Courtiers Wealth Management

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What does the future hold for our pensions?

2 Jan 2020

As the dust settles on the General Election, what impact will the sizeable Conservative majority have on pensions? If manifestos are to be believed we ought to see a number of changes come through in quick succession.

First and foremost the government confirmed on Thursday 19th December that it would be moving forward with Guy Opperman’s Pensions Bill, albeit in a slightly revised form to the version originally presented in October’s Queen’s Speech. This Bill focusses on three key areas:

  1. Increased powers for the Pensions Regulator. Companies may be forced to close final salary funding gaps (‘black holes’) more quickly where the Regulator feels they can afford to do so. A new criminal offence is also likely to be introduced to target directors who fail to protect final salary scheme members, with prison sentences of up to seven years for the worst offenders. Whilst both measures are entirely laudable, they could have the unwanted effect of encouraging more final salary schemes to close.
  2. The Pensions Dashboards. Assuming the schemes ever get off the ground, they will allow us to see all of our pensions in one place, presented in a standardised format. This is a tremendous initiative and should boost pension engagement. However, there is also a tremendous amount of work to be done since the UK pension system is monstrously complex and fragmented after decades of tinkering.  Bringing together all the stakeholders and reaching a consensus will make Brexit seem like a walk in the park. The official website somewhat optimistically states that ‘governments, regulators, and businesses in the pension industry are all trying to make the Pensions Dashboards available online from 2019.’ We hope it is successful but it certainly wasn’t live in 2019. Maybe 2020 will be the year – it can be the industry’s New Year’s resolution…
  3. Collective defined contribution schemes. The Government wants to introduce multi-employer pensions to try to eradicate perceived problems in smaller scheme management. Whilst the government did have some success with the automatic enrolment initiative of recent years, there are lots of hurdles to jump with this project so we expect progress to be relatively slow.

Aside from the Pensions Bill, the Tories also pledged to address, within 30 days, the pension anomaly that stopped NHS doctors from working overtime. We’ve expressed our feelings about the Tapered Annual Allowance to anyone prepared to listen, so any steps the government takes to eradicate this ludicrously complicated tax will be welcome. Let’s just hope it isn’t yet another sticking plaster that only cures the doctors’ problem. The Tapered Annual Allowance is causing much wider angst and needs to be scrapped.

Finally, the Conservatives pledged to maintain the State Pension triple lock, which will please pensioners across the land, and to address a quirk whereby lower paid people miss out on tax relief if they join certain company pensions.

An increase to the pension Lifetime Allowance wouldn’t go amiss but I feel that we may have used up all available festive goodwill.

Please note that tax treatment depends on individual circumstances and may be subject to change in the future.

Warning – the views expressed by Courtiers in this summary and any video and video transcripts, are reached from our own research. Courtiers cannot accept responsibility for any decisions taken as a result of reading this document, watching the featured video or reading the video transcript and investors are recommended to take independent professional advice before effecting transactions. The price of stocks, shares and funds, and the income from them, may fall as well as rise. Past performance is not necessarily a guide to future returns.

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