Nigel Roth, Senior Partner at Mercer comment on the 2013 Budget: No changes to pension tax approach welcomed:
“We’re pleased to see no further surprises in this area for the moment. Frequent changes to pension taxation have greatly undermined the ability to make long-term savings plans for retirement. The search is on for something different. Companies are beginning to look outside pension provision when thinking about their more highly-paid employees and considering how to combine pensions and other employee reward elements to build long-term wealth.
“We are seeing more use of pension alternatives: shares, restricted shares or cash payments in lieu of pensions, capital share schemes or full utilisation of a Share Incentive Plan (SIP). However, what this means is that individuals have more capital to manage and are exposed to more risk in a less tax-efficient environment. High-earning employees need to ensure that their management of investment risk is top-tier and that they take full advantage of inheritance planning”.
Andy Zanelli, head of retirement planning, AXA Wealth, says the 2013 Budget is good news for financial planners.
“The 2013 Budget was going to be one of two things: benign or containing a left field measure no one could have predicted. As ever, the devil is in the detail and on reading the complete Budget document posted on the Treasury website my particular attention was on Section 2. This section contains detail of the effect any measures would have for the financial planning profession. Two phrases were regularly repeated “As announced at Budget 2012” and “As announced at Autumn Statement 2012”.
“With only a few minor tweaks coming in the 2013 Budget, the phrases mentioned above are great news for financial planners as there are no fundamental changes to what we already knew. As a profession that has had to deal with RDR, a raft of regulatory change and the already announced tax changes planned for this year and 2014, a period of stability to embed these changes is welcome relief. There are significant changes ahead that have already been announced, and the opportunity to deal with these without additional distraction is great news.”
Kevin Legrand, head of pensions policy, Buck Consultants said:
“Although the Regulator currently does in many cases take account of the position of employers when reviewing deficit funding plans, the existence of an obligation to do so will ensure that it is considered, consistent and at the same level of importance as the other obligations. Buck has been arguing for this for some time and we support the Chancellor on this.”
Commenting on today’s Budget, Bob Scott, senior partner at LCP said:
“Today’s Budget is a welcome break for pension schemes, which have been subjected to numerous changes over the course of the last few Chancellor’s statements.
But with that in mind, it’s now more important than ever that the Pensions Minister takes action on his plans for defined ambition. Otherwise, bringing forward the flat-rate state pension to 2016 and abolishing contracting out are likely to hasten the demise of defined benefit pension schemes leaving the majority of employees with no more than a defined contribution scheme.
There was some speculation before the Chancellor’s speech that further cuts could be made to the Annual Allowance. Although this hasn’t been announced this time, that may be no more than a stay of execution until the Autumn Statement later in the year”.
Commenting on the Treasury’s decision not to pursue asset and liability smoothing for DB schemes, James Mullins, Partner, at Hymans Robertson said:
“Despite asset growth and lower volatility in financial markets in recent months, pension schemes are a long way from getting out of present difficulties. The Chancellor has seen the big picture and abandoned the idea of letting pension schemes smooth their way out of what really are difficult times
“The UK’s recent down-grade, talk of negative interest rates and potential further rounds of QE highlight the wider economy is still struggling as are many of the companies that sponsor pension schemes. Smoothing pensions liabilities would potentially brush long term problems under the carpet.
“Pension schemes generally need more capital, having struggled with increasing life expectancy and a decade of weak growth asset returns. Tinkering with the measurement just because the answer it gives isn't palatable is in nobody's interests. Companies, trustees and employees will be better served by shifting the emphasis towards a long-term risk management framework. The Chancellor’s announcement means industry can move on from this distraction.”
Commenting on the Budget 2013, Bob Scott, senior partner at LCP said:
"Today's Budget is a welcome break for pension schemes, which have been subjected to numerous changes over the course of the last few Chancellor's statements.
But with that in mind, it's now more important than ever that the Pensions Minister takes action on his plans for defined ambition. Otherwise, bringing forward the flat-rate state pension to 2016 and abolishing contracting out are likely to hasten the demise of defined benefit pension schemes leaving the majority of employees with no more than a defined contribution scheme.
There was some speculation before the Chancellor's speech that further cuts could be made to the Annual Allowance. Although this hasn't been announced this time, that may be no more than a stay of execution until the Autumn Statement later in the year".
Hans Georgeson, Managing Director of Architas, comments on the changes in the Budget for the investment management industry:
“We strongly support the Chancellor’s objective to make the UK one of the most competitive locations in the world for investment management. The changes announced in the Budget will go some way to supporting and growing this important sector for the benefit of the UK economy.
“The stamp duty on transactions is currently included in the overall cost of the fund. So while it may not be explicit the cost is ultimately borne by investors. The decision to abolish it is a positive move that will improve the overall competiveness of the sector at a time of increasing global competition.”
Roger Mattingly, President of The Society of Pension Consultants said of today’s Budget:
“We welcome the bold move to bring the single tier pension forward to 2016 and, although there remains a great deal of work still to be done in a relatively short space of time, this is achievable and will greatly benefit pensioners.
“The £3bn spend on infrastructure follows calls to boost infrastructure investment as the UK, however we need to see more detail; the key will be to ensure that the extra investment needed is concentrated in the most important areas, such as high-speed internet to attract and facilitate imports and exports.
“This was a conspicuous Budget in terms of pensions, there were no surprises. We can breathe a collective sigh of relief that there was little tampering with the current pension regime. However, it is a shame that the Chancellor overlooked the opportunity to address early access to tax free cash. At 55, most members take the maximum cash allowance, so bringing forward access to 50 should leave retirement income reasonably intact whilst providing a material "intravenous QE " type boost to consumer spending or allow the paying down of debt. Allowing early access to cash – but not to pensions – would also negate the risk of pension liberation and the threat facing many vulnerable pensioners.”
Jonathan Smith, UK Strategic Solutions, Schroders, comments on the Budget 2013:
"The government has announced that it has abandoned plans to allow pension schemes to smooth asset and liability values. While this might disappoint some hoping for a less bumpy ride, the devil was most definitely in the detail. In reality, smoothing would have only temporarily suppressed the true risk associated with providing defined benefit pensions, at exactly a time when sponsors and trustees should be focussing on managing this risk effectively.
"In a further development, the Chancellor announced in today’s Budget that The Pensions Regulator (TPR) will take account of a scheme sponsor’s ability to maintain sustainable growth when assessing a defined benefit pension scheme’s funding plan. TPR will issue further detailed guidance in its annual funding statement shortly. Greater flexibility will inevitably be welcomed; however additional flexibility should not come at the expense of robust funding and investment risk management."
|
