5th October 2015
Lucy Dunbar, senior associate at Sackers, takes a look at HM Treasury’s consultation on pensions tax relief…
Whilst we support measures that will help individuals benefit from a more secure retirement, we are surprised that a radical overhaul of the system may now be on the cards.
There can clearly be a tension between managing public finances and achieving the stated objective of strengthening the incentive to save. However, care should be taken to avoid a situation where existing incentives are reduced, with the result that lower levels of pension saving actually ensue.
Sustainability means individuals being able to understand what they can (and should) save and when, and what they will receive in the future.
For a system to be sustainable, it also needs to be left alone. Although the introduction of automatic enrolment is achieving its aim of increasing the take-up of workplace pension saving, other changes, such as the successive reductions in both the LTA and AA, can be seen to be having the opposite effect.
Constant change can be detrimental, leading to increasing distrust of the pensions system. Further changes will only exacerbate this problem.
Schemes are still taking on board the rapid changes to private pensions that have been introduced in the past few years, such as the introduction of the new retirement flexibilities for DC savers in April 2015. If further changes are introduced, especially if these fall on the more radical end of the spectrum, these must be fully considered, with trustees, employers, providers and others being given sufficient time and support in relation to implementation.