The March 2016 Budget saw pro-EU George Osborne perform a dramatic U-turn on plans to reform pension tax relief due to fears of antagonizing backbench Tory MPs likely to vote leave in the upcoming EU referendum. And the March 2017 Budget avoided any significant pension changes simply because the Government is so preoccupied with the outcome of that very same referendum — Brexit. Indeed, Hammond merely confirmed in the Budget that the Government will go ahead with the reduction in the money purchase annual allowance from £10,000 to £4,000. He also announced a reduction in the dividend allowance from £5,000 to £2,000 in a move that will arguably have a disproportionate impact on pensioners.
The March 2017 Brexit Budget was very light on actual pension reform and this is surely a taste of things to come. With the Government totally immersed in Brexit considerations, it will be very difficult politically to push through any significant changes or reforms to the sector. All proposals and policies will be viewed through the blinkered lens of Brexit. And such Brexit blurred vision could be very damaging for the pensions industry at a time when the country faces a real retirement crisis. The firm focus on Brexit will also impact other sectors such as long-term care and homecare, both of which are teetering on the edge of crisis.
The simple fact of the matter is that the UK is in the grip of a savings crisis that poses a serious threat to the wellbeing of future retirees. The current workforce faces the prospect of pensioner poverty later on in life, with employees not saving enough for retirement and large portions of the population unengaged and confused by the sheer complexity of the pension system. Throw into the equation the fact that the UK’s ageing population means fewer people in the workplace will be able to support those in retirement and you have the conditions for a perfect retirement storm. Never has there been a more urgent need for the Government to take concerted action to avert, or limit the fallout of, the savings crisis.
Unfortunately, these pressing problems come as the Government finds itself totally preoccupied with Brexit considerations. And with the UK set to trigger the start of Brexit negotiations on March 29, this preoccupation will likely morph into something of an all-consuming obsession.
As former Bank of England Governor Lord Mervyn King says, such an obsession will see the Government fail to address some of the big issues confronting the UK.
“My biggest worry about economic policy in the next few years is that all the politicians seem obsessed with Brexit,” Lord King told the BBC’s Newsnight on March 20.
He added: “And actually, the biggest problems we face now are not Brexit — it’s about how we can reduce the trade deficit, how we’re going to save enough as a nation to pay for our pensions … how we’re going to save enough to pay for care for the elderly … how we are going to finance the NHS.”
With DB schemes facing significant funding shortfalls, annuity rates falling off a cliff and the state pension triple lock looking unsustainable, the Government faces an array of pressing pension problems. These are grave issues which will spiral out of control unless they are addressed as a matter of urgency.
In the more immediate future, the pensions dashboard is set to launch in 2019. Hailed as a game changer, the dashboard will allow savers to calculate the total value of their savings and access any lost pension pots. It is hoped the Government initiative (which is being managed by the ABI) will help consumers engage with and understand workplace savings. But question marks remain about how the dashboard will be funded and whether legislation will be required to compel providers to contribute the necessary data. And this will require input from the Government. Smooth launch of the dashboard will also be important. CoreData’s November 2016 UK pensions report found 76% of advisers support the introduction of the pensions dashboard. But of those in favour, 41% support it as long as rollout is smooth, suggesting a degree of concern over its practical implementation.
The Government will also need to address concerns that pension freedoms have gone too far and added new layers of complexity for consumers already bewildered by the confusing array of choices.
There is no denying that the Government’s in-tray is stacked high. But while Brexit may have thrown a spanner in the works, this should not equate to total mechanical failure. The engine of Government still needs to motor on and tackle those fundamental issues of our time. Chief of which are pensions, savings and long-term care. payday loan быстрый займ якутскзайм под залог недвижимости в иркутскеденьги под займ