A fairly quiet budget?

It seems highly unlikely, with a minority government and its current pre-occupation with Brexit, that there will be any major alterations to pensions in this budget. The government will wish to avoid controversial policy changes which they fear might give rise to further embarrassing U-Turns at a later date.

We shall doubtless hear a lot of fairly high level repetitive stuff about the success of auto-enrolment, the government’s determination to ensure members get maximum value from their pension saving and their determination to crack down on cold-calling and pension scams.

A proposed White Paper on DB pensions and the plans for a pensions dashboard will also likely get a mention. However, as we know, there will be no space for new legislation on pensions in the next two years, with the chances of a pensions bill before 2020 being very slim. So whereas the government may want to give an impression of a lot of activity, on a purely practical level very little is likely to happen on the pensions front at the present time.

All the signs are that the government will not wish to resurrect the question of increased national insurance for the self-employed, or the so-called dementia tax on long-term care. Both of which they have effectively very recently u-turned on and are now deeply buried in the long grass, where they are likely to remain for some time.

It is possible we might hear about plans to bring the self-employed into the ambit of auto-enrolment, but without any real detail as to how and when it will operate at an operational level.

There may be reference to the Cridland Report in this Autumn Statement. There could be government commitment to maintaining the purchasing power of the pension and to carrying out at least five-yearly reviews of state pension ages. They are unlikely to want to say too much about the long term future of the triple lock, other than a clear commitment to keep it, and the other so-called pensioner benefits, until at least the end of the current parliament.

It may be that pension tax-relief, and the allowances associated with it, will feature to some extent in this budget. Although the Prime Minister will undoubtedly want a ‘steady as you go’ budget the Chancellor has big holes to fill. The £35 billion he has to find every year for contribution tax-relief is a fairly obvious target. He may feel able to bring in a flat-rate of tax-relief of, say 25 – 27%, putting the emphasis on the increases that will result for low earners rather than the reductions for higher-rate payers.

What is more likely is further reductions in the Lifetime Allowance, down from £1m to, say £750,000, and the Annual Allowance, down from £40,000 to perhaps £35,000 or even £30,000. He could be set to end the national insurance exemption on pension contributions from employers. This cost the government £15.7bn in 2015/16 as auto-enrolment ramped up, and stripping away this relief would heap the cost on corporates without hitting employees directly.

Further reduction of pensions tax relief or the introduction of any restriction to ending employer national insurance exemption is expected to lead to corporate decision-makers disengaging from workplace pensions. This will impact the Government’s plans for improving retirement savings.

We will find out on 22 November what the Chancellor wants to do or, more precisely what he feels he can get away with, in the current febrile political climate.