Things in the Autumn Statement you might have missed

The headlines for pension commentators were the six-month delay to the full implementation of auto-enrolment contributions to April 2019, and confirmation of the state pension triple lock for another year.

Both decisions will adversely affect the size of future private pension pots by reducing contributions.

Sustainability of the triple lock is increasingly under question, as it might look just about affordable while inflation is almost zero, and a lot will depend on the willingness of taxpayers to support it.

A few plans for the 2016 finance bill were flagged:

• No inheritance tax charge to arise when a member designates funds for drawdown but does not draw all of the funds before death (backdated to April 2011);

• Simplification of the test when a dependant’s scheme pension is payable (for deaths after age 75 the present legislation is effectively unworkable); and

• Alignment of the pension tax rules on bridging pensions with Department for Work and Pensions legislation.

Local Government Pension Scheme funds were most directly affected by the announcements. The government has become impatient with slow progress on asset pooling and investment in infrastructure and will create six ‘British Wealth Funds’ with £25bn each in assets.

That might prove a plus, but the £6.1bn reduction in the local government grant by 2019-20 will emaciate staffing levels and consequently reduce contributions. Bad news for an already formidable deficit.

Indirect effects

The new apprenticeship levy from April 2017 might affect pension schemes indirectly through its impact on sponsoring employers.

Opt-outs might also increase, by employees who face a drop in net income as a result of the transition from tax credits to universal credit.

The £6.1bn reduction in the local government grant by 2019-20 will emaciate staffing levels and consequently reduce contributions. Bad news for an already formidable deficit

Proposals for simplification of employee share schemes offer a glint of hope.

The absence on this occasion of anything more dramatic, particularly on pensions tax relief, is partly due to the government’s prior decision to delay its response to the green paper until the Budget in 2016.

Evidently the chancellor was also emboldened by the fantastic £27bn increase in the Office for Budget Responsibility’s forecast for future tax receipts.

This was even more of a jaw-dropper than the violent oscillations in defined benefit funding deficits. It reminded us of what the eminent economist John Kenneth Galbraith famously said about economic forecasting: its only function is to make astrology look respectable.

But did the chancellor offer any such miraculous hope to beleaguered DB scheme trustees? No. He barely mentioned interest rates; quantitative easing not at all. Gilt yields are apparently not a concern. There is no change to the plan for gilt sales.

The entire industry awaits with trepidation the 2016 Budget, hoping against hope that the decision will be ‘no (fundamental) change’ to the system of pensions tax relief.

Meanwhile, the chancellor warned that potentially unwelcome distractions like the proposed secondary market for annuities and a review of salary sacrifice would go ahead.

Humans are too expensive

Then there were the cuts to government departmental administrative budgets: both the DWP and HM Revenue & Customs were hit, despite, for example, the dramatic admission to a parliamentary committee that up to half of all calls to HMRC were going unanswered.

The government apparently has great faith in technology replacing expensive humans. It plans to invest £1.3bn to transform HMRC into “one of the most digitally advanced tax administrations in the world”.

Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account.

That sounds like more work still for us, while making it ever harder to get answers to complex questions out of those who make the impenetrable rules.

Ian Neale is director at Aries Insight