Autumn Budget 2024

Commenting on today’s budget, Calum Cooper, Head of Pension Policy Innovation, Hymans Robertson says: 

“The budget announced today is bold and ambitious with a clear goal of stimulating sustainable long-term growth, in partnership with enterprise. After almost three decades, there are echoes of the 1997 and 2000 Brown budgets combining the focus on enabling long-term investment on health, education and now the energy transition plus the return of a flavour of the ‘Golden Rule’ that enables borrowing for long term investment. Ten years of sustained growth followed the early Brownite budgets, that’s what the Chancellor will be banking on this time too, and with the ambition for material sustained public investment the narrative is clear. 

“It’s great to see no detrimental change in tax relief on UK investments. This was also a key feature in the Brown Budgets that inadvertently called time on pension investments in the UK, though perhaps this was a missed opportunity to incentivise a reverse of that trend and moreover to improve pensions adequacy. On pensions more generally, the changes are evolutionary but transformational. Counter-intuitively, the removal of inheritance tax relief on pensions will actually encourage people to get a pension. The change in inheritance tax will stimulate fresh ideas, like risk sharing, so that people get higher pensions and continue to invest in their pension for as long as they live. Enjoying pensions while we are alive, rather than storing wealth to pass on, will also stimulate economic growth which will benefit the next generation too. This will help to re-kindle our ‘in it together’ social contract. With the phased pension review, we look forward to engaging as the decisions announced today create a better financial future.” 

Commenting on the change to employers’ national insurance contribution, Hannah English, Head of DC Corporate, Hymans Robertson says: 

“The increase in National Insurance Contributions (NICS) for employers from 13.8% to 15% announced in the Budget today, is likely to dramatically increase the costs for employers. While the perception that the recent reductions in DB scheme funding costs have created more than enough breathing space for extra national insurance contributions for UK corporates on their wage bills. We are concerned the opposite is true. Stacking another cost on the pay and benefits for every UK corporate may drive behaviours that yet again can harm today’s ‘working people’ in their DC pension schemes. 

“Corporates may choose to stop sharing employer NI savings on salary sacrificed pension contributions. For an employee on a £32k salary making 5% contributions into their pension via salary sacrifice, the employee may currently benefit from an additional £221 per year by way of the valuable sharing of all NI savings. If employers decide to no longer share these savings this could have a long-term impact on the outcomes of today’s savers. 

“The change announced by the Chancellor may be the final straw for those employers that have upheld their generous pension contributions despite difficult economic conditions. In this case, such scheme contribution structures may increasingly get overhauled.” 

Commenting on the change to inheritance tax announced in today’s Budget, Hannah English, Head of DC Corporate, Hymans Robertson says: 

“The change announced by the Chancellor follows weeks of ongoing rumours around inheritance tax. With pensions assets now liable for inheritance tax from 2027 the implications for some DC members may be that savers start spending more of their pension pots now. This further reinforces this Government's clear intent that tax incentives for pensions are there to encourage individuals to receive a pension. The policy aim was never to encourage intergenerational wealth accumulation for the few. 

“The announcement today will reinforce people to save into their pension and live independently while, and for as long as, they are alive. This should stimulate spending and a better quality of life and in turn economic growth; in simple terms the incentive is to spend rather than store. 

“We await the consultation to better understand how the Chancellor envisions the change proposed today will work. Given this won’t be introduced until April 2027, it suggests that the government needs to put further thought to how this will be introduced in practice and whether any carve outs may be considered.” 

Commenting on today’s budget and the reaction from the gilt market, Chris Arcari, Head of Capital Markets, Hymans Robertson says: 

“As expected in today's budget, the Chancellor confirmed the government’s new investment rule will see debt defined as “public sector net financial liabilities”. 

“The Chancellor re-committed to meeting the first fiscal rule, that tax minus day-to-day spending be brought into balance. Increases in spending, particularly in health and education, are to be met with £40bn of tax rises, including, but not limited to, increasing employer's national insurance contributions (£25bn of the £40bn), higher rates of capital gains tax, and bringing pensions with the scope of inheritance tax. 

“The tweak to the fiscal rules, with debt defined as public sector net liabilities instead of public sector net debt, paves the way for additional investment over the parliament. With the government set to invest an additional £100bn over the next 5 years as a result of the tweak, we believe they are showing welcome restraint against the c.£50bn p.a of headroom the changes create. 

“The OBR has raised near-term growth forecasts and, crucially, as a result of increases to investment, has raised the long-term potential growth forecast for the UK. 

“Ten-year gilt yields initially fell while the Chancellor spoke but have risen during the opposition's response. At the time of writing, 10-year yields are up about 0.1% pa on the day. The market will need to recalibrate for materially higher near-term government expenditure and potential rise in business' labour costs, but we believe the systemic risks to the market are low.” 

Commenting on today’s Autumn Budget and the proposal to include death grants in inheritance tax, Ian Colvin, Head of LGPS Benefit Consulting, Hymans Robertson says: 

Despite significant rumours about what was to come in the budget, the LGPS community is probably breathing a fairly big sigh of relief right now. It’s pleasing to see that measures such as making pension contributions subject to tax or NI have not been followed up, given that these would act as a significant disincentive for employees to join or stay in the scheme. 

The one measure that looks to impact the LGPS directly is the proposal to include death grants within scope for inheritance tax. Perhaps surprisingly, in the consultation that accompanies the budget, the government makes clear that it expects pension scheme administrators to calculate and recover any tax due. A measure which is likely to add unwelcome complexity. 

Commenting on today’s budget, Iain Campbell, Head of LGPS Investment, Hymans Robertson says: 

“The budget was somewhat of a damp squib for the LGPS, with no further updates to their plans for issues like encouraging UK investment. It looks like this will instead be entirely captured within the Pensions Investment Review, where we understand an interim report will be released soon. 

"Whatever comes next for the LGPS, we hope that the government looks to work closely with all those involved to deliver opportunities that help them achieve their goals and allow the LGPS to continue to deliver for its members.”