What the industry wants to see in the Autumn Statement

Pensions saw unprecedented change under George Osborne, so more might not be on the cards this time, particularly since many government resources will be taken up by Brexit. And with Hammond widely perceived as less personally ambitious and activist than his predecessor, many expect a low-key announcement.

Ian Neale, director at intelligence provider Aries Insight, said the “single most important thing” is that any new measures do not add to the cost burden of the industry.

Reframe tax relief as a bonus

Neale doubted there would be a dramatic statement on tax relief, but said it might be reframed as a bonus.

“Tax relief is poorly understood. If it’s presented instead as a government contribution that is equivalent to tax relief… it sounds more encouraging to the average savers,” he said.

Darren Philp, director of policy and market engagement at B&CE, which runs mastertrust the People’s Pension, said people have a poor understanding of how tax relief works.

“Most people don’t understand what tax relief is; if you say ‘tax relief’, they think they’re being taxed.”

Presenting it as a top-up could change that, he said, but added this could be better achieved if tax relief was flat rate: “Once you move to a flat-rate relief it’s easier to reframe it as a match.”

Old Mutual Wealth’s pensions expert Jon Greer noted that the likelihood of pensions tax relief being left alone was probably relatively small going forward, but said more research into how people’s understanding is improved with any change is needed before taking action.

“Whatever system we move to, it needs to be proved that it’s actually going to incentivise people to save. And I’m not sure that we’ve had that level of research, which is backed up on actual testing with members of the public about what they understand of pensions,” he said.

Scrap the tapered annual allowance

Another area of complexity many in the industry would like to see simplified is around the annual and lifetime allowances.

Neale said Hammond could do two things that would receive "pretty widespread acclaim”: scrapping both the lifetime allowance and the tapered annual allowance.

For defined contribution savers, the lifetime allowance is "a tax on investment performance and disincentive to save", as well as leading people “into the grey area of tax avoidance”, said Neale.

Simplifying annual allowance legislation by removing the taper would also be welcome, he said. “It introduces a significant level of complexity for a modest return in tax. It’s a disincentive for high earners, but also for those who run businesses.”

Greer agreed a change to the tapered annual allowance would be welcome.

“We get many questions from financial advisers, the majority of which are on the annual allowance and tapered annual allowance. The complexity for financial advisers is huge, let alone for individuals who try and understand these rules.”

Some financial advisers decide to simply tell clients to make the minimum contributions, to ensure they are not affected. “I’m not sure that’s necessarily the right behaviour… driven by the policy,” said Greer.

Lower the auto-enrolment threshold

Mastertrust Now Pensions has called for the removal of the qualifying earnings threshold for auto-enrolment, saying this could increase the pension pots of part-time workers by 140 per cent.

Philp agreed the earnings trigger is too high: “At the moment we’ve got a situation whereby people with multiple part-time jobs might not earn above [the] threshold.”

However, new research by think-tank the Resolution Foundation has found that the proportion of workers doing multiple jobs is at a record low, particularly among those who are employed rather than self-employed. 

Notwithstanding, Greer is also in favour of at least lowering the threshold to include multiple jobholders. “Those guys are falling through the gaps, which doesn’t seem right,” he said.