Editorial: The pension items touched on in Wednesday’s Autumn Statement may not have been as tectonic as the industry has become accustomed to in recent years, but it was further confirmation – if ever it was needed – that a break from ‘progress’ is not on the cards.
Wednesday’s event contained a touch of the bizarre. George Osborne, following the tax credits furore with Lords last month, was forced into what should have been a humiliating U-turn, but which he delivered with an almost admirable assertiveness. Things got even better when Labour barely challenged the climbdown and the shadow chancellor turned to Chairman Mao for backup.
But on the pensions front it was employers who gained a free pass of sorts, as it was announced that the phasing up of auto-enrolment statutory contributions would be set back by six months to align with the tax year.
A reprieve for employers and saving for the government in terms of tax relief.
Illustration by Ben Jennings
However, it has sparked fears among some that the move could be the government getting its ducks in a row ahead of a possible transformation to taxed-exempt-exempt, a decision we’ve been told not to expect until the spring Budget.
But the retrospective fury that could ensue should it later appear that an early decision was made on whether the pensions system should lose its upfront tax relief could further shake trust in government and embolden calls for an independent commission.
Another pensions side note in the statement was the effective green light for a secondary annuity market, a topic that has somewhat fallen off the radar since the consultation earlier this year.
The concept, which would effectively free existing policyholders from the shackles of often poor-value annuities, has several operational barriers. One of the biggest questions is pricing and how to devise a framework that is beneficial for both the annuitant and the end buyer – which could include defined benefit pension funds looking to match their liabilities.
The market will be driven by insurance companies that have grown used to innovating of late, since many have been forced to make up lost ground on the annuity sales slump that followed the pension freedoms.
As ever, with challenges come opportunities.
Maxine Kelly is editor at Pensions Expert. You can follow her on Twitter @MaxineEK and the team @pensions_expert
