Commenting on today’s Spring Statement announcement regarding expanded childcare and the implications for the gender pensions gap, Kathryn Fleming, Partner, Hymans Robertson says:

“We are very pleased to see the government update in today’s Spring Statement regarding changes to childcare. Following on from our comments at the Work and Pensions Select Committee regarding the importance of reducing the ever widening Gender Pensions Gap, any actions that can be taken to reduce the gap through a reduction in career breaks, is welcome. We hope today’s announcement goes some way to encouraging women back into the workforce by helping to reduce the caring responsibilities which disproportionately impact women, and in turn continue to drive a gap between the genders when it comes to pensions.

“However, there is much more that needs to be done to help those with wider carer responsibilities, and we look forward to the government and Pensions Minister considering ideas like the Auto Enrolment Carers Credit next. That said today’s announcement, when combined with the potential changes to the automatic enrolment that are currently making their way through the House of Commons, points towards an unlocking of a door of policy change that will help remove pension inequality barriers. We look forward to seeing this government push the door wide open.”

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Commenting on today’s Spring Statement regarding the abolition of the Lifetime Allowance (LTA), Hannah English, Senior DC Consultant, Hymans Robertson says:

“We’re pleased to see that that Government has abolished the lifetime allowance and increased annual allowances (including money purchase annual allowance) to more sensible levels for most people.

“Whilst the abolition of the LTA may remove some of the barriers to saving, for the very highest earners (with an adjusted income of over £360k) the maintenance of a taper within the Annual Allowance will restrict tax efficient saving to £10k a year. For these members the abolition of the LTA will be of little relevance, and offer little in the way of improvement. At every budget there has been speculation as to whether the 25% tax free cash allowance will be removed. The freezing of the maximum tax free cash lump sum at £268,275 is less welcome and marks the beginning of the end of this much loved benefit.

“Over the last 12 years, Government policy with respect to the lifetime and annual allowances has made it impossible for individuals to effectively plan for retirement. Government interventions seem to be driven by the political impact of poor policies, like doctors refusing to work shifts, rather than adopting long-term policies that give the industry and individuals trust in the pension system. Whilst the abolition of the LTA simplifies the pension taxation system, changes to the tax free cash allowance and continuing with the Annual Allowance taper means uncertainty remains for further changes.

“Whilst we agree we with the need to increase the annual allowances and support the abolition of the lifetime allowance, we question whether these changes alone will meet the government’s objective of encouraging the over 50s back in to the workplace. A more effective mechanism for getting the over 50s back to work is likely to be general taxation. The freezing of the tax thresholds until 2026 acts as a real disincentive for the wealthy over 50s returning to work.”

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Commenting on the changes mentioned in the Spring Statement regarding LGPS pooling, Iain Campbell, Senior Investment Consultant, Hymans Robertson says:

“It is positive to gain further information from today’s Spring Statement on the Government’s desired future path for LGPS pooling. Great strides have already been made with regards to the transferring of assets to pools, however this new potential deadline to pool all “listed” assets by March 2025 is a step-up in expectations from Government. We welcome further detail on this in the forthcoming consultation, such as what is classed as “listed”, as well as how passive assets will be considered.

“The potential move to a smaller number of larger pools is also an important development in Government’s plans for pooling. Again, we look forward to seeing considerably more detail from the Government on areas such as timescales, how they foresee this taking place, as well as their expectations for cost savings given the potential further costs of this exercise.

“Finally, the potential requirement for funds to invest in illiquid assets, such as venture and growth capital, in order to provide support to the UK economy, as mentioned in the Edinburgh Reforms, is something that funds will need to provide clear feedback to Government on. Whilst these are asset classes that many LGPS funds invest in already, careful consideration will need to be given as to how funds might invest whilst ensuring they can still expect to earn their required rate of return, for an acceptable level of risk. This balancing of fiduciary duty and support for the UK economy will be a challenge, but it is one we are working on with many clients already. We again look forward to seeing further detail on this from Government in due course, including how this ties in with their previous statements and objectives on “levelling up”, what types of investment would fulfil their requirement and whether any new requirement would be in addition to any investments already made.”

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Commenting on the changes to LTA and what this means for the LGPS, Ian Colvin, Head of LGPS Benefit Consulting, Hymans Robertson says:

“We are pleased to see that that Government has abolished the lifetime allowance and increased annual allowances to more sensible levels for most people. Although the lifetime allowance only affects a small number of LGPS members, the nature of the Scheme means that senior officers with long service have very little flexibility to amend their pension savings to stay within the limits.

“The reduction to the annual allowance in recent years has seen significantly more LGPS members breaching the limit, including those who might not traditionally be thought of as high earners. The increase to £60,000 will mean that the charge is now likely to fall on the highest paid members of the Scheme or those who experience a significant pay rise.

“As always with pension saving, long term stability is key and the regular tinkering with allowances makes it extremely difficult for individuals to plan properly. There are likely to some senior officers who had planned to retire on 31 March this year who will be anxiously knocking on the door of HR tomorrow morning to see what their options are. The difference of a few days could be the difference in hundreds or thousands of pounds of tax for some.”