Budget 2018 – good news for pensions
On 29 October 2018, the Chancellor, Philip Hammond, delivered the 2018 Budget.
Lucy Dunbar, partner at Sackers, commented: “The budget should be seen as a “good news” story for pensions, with the headline message of no significant changes to pensions tax relief or tax allowances giving welcome stability. The Government’s commitment to the development of pensions dashboards, allowing individuals to see all their pension pots in one place, is a positive move, particularly given the uncertainty that has surrounded the project to date. With the confirmation that state pensions will be included in the dashboards, the hope is that these tools will enable individuals to better understand the overall income they can expect in retirement and what future retirement savings they may need to make.”
While there was little in terms of pensions “news”, the Chancellor did confirm the following:
- the Lifetime Allowance will increase in line with CPI for the tax year 2019-20, rising to £1,055,000
- the Government is pressing ahead with the proposed ban on pensions cold calling. HMT’s response to its July 2018 consultation was published, together with final regulations, alongside the Budget statement. The regulations will be subject to parliamentary approval and brought into force as soon as possible thereafter
- the Government will consult “later this year on the detailed design for Pensions Dashboards, and on how an industry-led approach could harness innovation while protecting consumers”. The Budget provides funding for this
- with a view to “boosting pensions for the self-employed”, the DWP will this winter “publish a paper setting out the government’s approach to increasing pension participation and savings persistency among the self-employed”
- a reduction in the discount rate for public service pension schemes, to 2.4% plus CPI, in line with established methodology to reflect OBR forecasts for long-term GDP growth. The statement notes that the valuations “indicate that there will be additional costs to employers in providing public service pensions over the long-term”
The Chancellor also announced that following a recent update of TPR’s guidance on investment governance for DC schemes considering patient capital investment:
- through the British Business Bank, the Government will support pension funds to invest in growing UK businesses
- the FCA will publish a discussion paper by the end of 2018 to explore how effectively the UK’s existing fund regime enables investment in patient capital. This will accompany the ongoing work of HM Treasury’s Asset Management Taskforce to explore the feasibility of a new long-term asset fund
- the DWP will consult in 2019 on the function of the pensions charge cap to ensure that it does not unduly restrict the use of performance fees within default pension schemes, while maintaining member protections, and
- the FCA will consult by the end of 2018 on updating the permitted links framework to allow unit-linked pension funds to invest in an appropriate range of patient capital assets.
We await publication of the Finance Bill 2019, due on 7 November 2018.