There was a clear reemphasis of the government’s determination to transform pensions and so the industry faces a period of unprecedented change. The speech had references to the changes awaiting the LGPS and DC pensions markets and reiterated the commitment to the dual aims of better pensions for individuals, and pensions as a force for good for the economy also; ideas we fully support.
“One notable area where change looks to be coming is around ISAs. We expect with a consultation likely to appear after the summer recess. Putting money into an ISA (along with saving into a pension) is one of the first steps many will take into the world of investing and future proofing; it will be interesting to see what comes next here. ISAs can provide savers with the more flexible savings than pensions, particularly for savers who require quick access to their funds. If the regulations and or limits on tax efficiency change, this could impact savers’ views on the benefits of saving into an ISA versus a pension.
“Speculation continues to gather pace that the Chancellor will raise taxes and announce spending cuts in the Autumn, with pensions a potential target. Two areas that continue to be rumoured are salary sacrifice and the lifetime allowance. Salary sacrifice is an extremely popular and efficient mechanism embraced by both employers and employees and change in this area would be seen as a mistake by many. The lifetime allowance (LTA) was removed in 2024, and we know the members of the government are keen to bring this back as a means of funding the government’s fiscal black hole. If this was to be reintroduced, this could affect the limits on which savers can save into pensions. Current speculation could risk savers making potential knee jerk decisions to avoid a possible reintroduction of the LTA, which could have long lasting consequences. It is important that as an industry we do not encourage such decisions in the absence of certainty on possible changes. The proof will be in the Budget, but it is clear from the speech last night that pensions will be a key area of focus for the Chancellor and play a central role in her Autumn Budget.”
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