Editorial: Despite the inevitable post-Budget hole-picking, you have to hand it George Osborne who did exactly what he set out to do in this year’s announcement. He must be feeling very smug.
The fiscally neutral raft of measures was designed to talk up Britain’s recovery and avoid rocking the boat in the run-up to the too-close-to-call election in May.
Britain is walking tall again, he declared proudly. Growth is up, with gross domestic product forecasts for the next few years also revised upwards. Unemployment is down. Debt is falling. And it’s early doors for the end of the squeeze on public spending.
“The sun is shining and we are fixing the roof,” Osborne cheered.
But that also includes the roof on the amount you can put into a pension over a lifetime without incurring a severe tax penalty.
Illustration by Ben Jennings
The reduction of the lifetime allowance to £1m from £1.25m in 2016 is expected to raise £600m a year for the Treasury’s coffers although we’re told it will only affect 4 per cent of savers.
But what this, along with the proposal to allow retirees to cash in their annuities, does affect is the growing range of seemingly disparate messages on show about defined contribution pension saving: contributions need to increase – but don’t save too much; reforms to get the masses saving mean they won’t fall back on the state – but at retirement the pot becomes a piggy bank.
On the pensions front, Osborne pulled enough rabbits out of hats last year to carry him through well into 2015, but these additional, albeit expected, changes add a further layer of complexity to what was already going to be a testing year for the industry.
And the tweaks do little to address the growing risks in the defined benefit pensions world.
As Lincoln Pensions’ CEO Darren Redmayne put it: “[The] reforms, while creating additional flexibilities, do little to assist DB schemes managing record deficits. This has to be the priority of the new government in May.”
Can’t wait for the Autumn Statement.
Maxine Kelly is acting editor of Pensions Expert. You can follow her on Twitter @MaxineEK and the team @pensions_expert.
