NEWS   |    November 23, 2023

The pensions measures announced in the Autumn Statement

In his Autumn statement, Chancellor Jeremy Hunt set forth a number of key pensions measures that the government will be seeking to implement in the near future.

The Chancellor made it clear that the government is pressing ahead with the Mansion House reforms introduced earlier in the year. One of the key aims was to move towards fewer, larger defined contribution schemes and for the majority of these pots to be managed in larger schemes worth over £30bn by 2030. The argument is that this will not only unlock funds for investment in emerging markets but also improve member outcomes in reducing the issues surrounding small pots. To this end, the government has announced plans to consult on a legal right for workers to require their new employer to pay pension contributions into an existing pot, rather than the employer’s own scheme. The government is also launching a call for evidence on a “lifetime provider model” (also referred to as a “pot for life”) to help simplify the market and allow individuals to move to having one pension pot for life, also noting that it will introduce the multiple default consolidator model to enable a small number of authorised schemes to act as a consolidator for eligible pension pots under £1,000.

As part of the Mansion House reforms, the government will also be consulting on proposals for the Pension Protection Fund to act as an investment vehicle for small defined benefit schemes.

The Chancellor announced that the government will consult on changes to the rules around when defined benefit scheme surpluses can be repaid, and look to introduce measures to protect members as part of an overhaul to the current regime. It was also announced that the current 35% tax rate on extracted surpluses will be reduced to 25% from 6 April 2024. The tax charge has been a particular problem, put in place when corporation tax rates (the tax saved when making pension contributions) were much higher, but this is not the only problem with surpluses. The process to repay them is complex and often (depending on scheme rules) unavailable. This is a big step in the right direction, but there is a long way to go. The problems around surplus repayment strongly discourage employers from funding already well funded pension schemes, because of the risks of not getting any surplus returned.

In addition, the abolition of the lifetime allowance was confirmed to be on schedule to take place by 6 April 2024. There were rumours that it may be pushed back to 2025 but it appears that the government is keen for this measure to be pushed through ahead of the general election, despite the tight timescales and the problematic early drafting.

The Chancellor further noted that the government will honour the pensions triple lock in full and so an 8.5% increase to state pensions will apply from April 2024. There were rumours of a reduced amount being awarded, taking into account public service pay increases throughout the year but it appears that the government continues to be fully committed to the triple lock policy.

Read the government summary of pensions measures, here.

 

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