Budget 2018: Pension allowances and tax relief were left well alone, but there was some pension news for consumers to digest. Here are three changes that went under the radar.
The chancellor stopped short of major pension changes in his Budget speech, but the small print holds several significant pension announcements.
There was little or no mention of the P word in chancellor Philip Hammond’s Budget speech this afternoon (29 October). Pension allowances and tax relief were left well alone.
However, pensions were not ignored altogether, as a trawl through the Budget documents reveals.
The Pensions Dashboard
Hammond has committed to a consultation later this year on the implementation of the Pension Dashboard, and to the inclusion of state pension information in it.
“While the 2019 implementation deadline still feels like a stretch, the fact a commitment has finally been made by the DWP to provide state pension information is a positive step in the right direction,” comments an AJ Bell spokesperson.
Steve Webb, director of policy at Royal London, adds: “It is a real step forward that the government has indicated that state pension data will be included in the design of what it calls ‘pension dashboards’.
“This greatly increases the prospect of dashboards which cover all the key pension information that consumers need to know. The additional £5 million a year for the DWP in 2019/20 is also a welcome symbol of the fact that the government is committed to taking this agenda forward, albeit more slowly than we would have wished”.
However, AJ Bell is less bullish. “For the project to have any chance of success, savers need to be confident the information available is both accurate and comprehensive. Anything less than this and people simply will not trust the information it shows them.
“For this reason it is highly likely the government will need to legislate to require older schemes to make their information available for the Dashboard.”
‘Patient capital’ funding
The government has hinted the 0.75% charge cap for contributions to companies’ auto enrolment schemes could be increased next year. It also promised to consult into encouraging pension funds to invest more into high-growth small and medium enterprises.
AJ Bell says: “While details are thin on the ground at this stage, it may be that the chancellor feels the existing charge cap potentially blocks schemes off from investing in the riskier next-generation companies he expects to drive growth in the future.”
However, there clearly needs to be a balance between stimulating returns from higher-growth businesses and maintaining value for money for pension scheme members.
AJ Bell adds: “Ultimately the aim of auto-enrolment default funds schemes is to maximise returns for retirement investors over the long-term rather than back particular sectors or businesses. If the charge cap were increased for certain types of investments, the trustees of that scheme would have to be confident the extra price paid by members was still money well spent.”
The government is publishing a response to its consultation alongside the Budget, and promises that it will shortly be implementing legislation to ban cold-calling – an announcement that has been a long time coming.
It is almost two years since the government’s initial proposals to combat pension scams were announced, with the cold-calling ban at their heart, but draft regulations were not published until this July.
Vince Smith-Hughes, retirement expert at Prudential, says: “Measures to ban pension cold-calling can’t be introduced soon enough. Our research indicates that nearly one in 10 over-55s fear they have been targeted by scammers since the launch of Pension Freedoms in 2015. Offers to unlock or transfer funds are tactics commonly used to defraud people of their retirement savings.
“One in three over-55s say the risk of being defrauded of their savings is a major concern following Pension Freedoms. However, nearly half of those approached say they did not report their concerns because they did not know how to or were unaware of who they could report the scammers to.”
However, David Everett, partner at pensions consultancy LCP, points out: “There is a potential gaping hole, however, when it comes to enforcement of this if calls are made from abroad and not on behalf of a UK company. In those instances, the Government will find itself powerless. The Information Commissioners Office will need to have arrangements in place with international regulators to mitigate the dangers and irritations posed by such calls.”
Subscribe to Money Observer Magazine
Be the first to receive expert investment news and analysis of shares, funds, regions and strategies we expect to deliver top returns, plus free access to the digital issues on your desktop or via the Money Observer App.Subscribe now