This year has been busier than expected for pensions professionals after several years of relative quietness, according to specialists.
Steve Webb, partner at consultancy LCP and a former pensions minister, told FT Adviser that a combination of an active former pensions minister in Laura Trott, a desire to see pension money invested in more productive ways, and a “bombshell Budget” has resulted in a busy year.
He argued that the biggest shock of the year came from the March 2023 Budget when it was announced the lifetime allowance would be abolished.
Webb said: “The main driver seems to have been the continuing flow of senior doctors leaving the NHS as they bumped up against pension tax limits.
“Whilst the abolition of the LTA must have seemed like a huge potential opportunity for those with spare cash to pump into their pensions, the immediate announcement by the Labour party that they would reinstate the LTA has created huge uncertainty.
“Abolishing the LTA has proved to be more complicated that the government expected, and reinstating it would be no easier, but either way it seems very unlikely we will see the sort of stable long-term tax environment on which long-term pension planning would ideally be based.”
Mansion House reforms
Another theme from the past year was the desire of the government to get pension funds invested more ‘productively’.
“By this, the government means invested more in things like unlisted equities, start-up companies, illiquid investments and the infrastructure needed to support the transition to a net zero economy,” Webb explained.
The Chancellor’s ‘Mansion House’ speech in July 2023 set out a range of measures including a pledge by many of the big workplace pension providers to invest at least 5 per cent of default fund assets in unlisted equities by 2030.
Jamie Jenkins, director of policy at Royal London, said the Mansion House speech “elevated the discussion on pensions in political terms”.
He said that linking pension investments with growth in the economy made sure there was plenty of attention on the role that people’s savings could make in powering the companies of tomorrow.
“This continued as a central theme in the Autumn Statement, with various announcements aimed at increasing the scale of pension schemes, with a view to improving their ability to invest in illiquid assets,” Jenkins said.
“While there is general consensus on this link, there are serious concerns about proposals to fundamentally change the way that pensions operate in the UK, with a consultation now underway as to how a ‘pot for life’ would work in practice.
“Time will tell whether this will ever materialise. What matters is that it undergoes proper scrutiny and debate, before we embark on a programme of change.”
