Autumn Statement 2023 avoided any sweeping changes in relation to pensions, instead focusing on providing better outcomes for savers and driving administrative and management costs.
In the build-up to the Autumn Statement, media and industry commentators were expecting further clarification on how defined contributions would be taxed on death which are expected to be introduced, along with other changes to pension rules in April 2024. However, it has now been announced that these points will be clarified in the Autumn Finance Bill 2023.
Jeremy Hunt referred to the current trend of consolidating pensions and the Financial Conduct Authority’s (FCA) new Value For Money Framework, the next steps of which are due to be consulted on in Spring 2024.
Autumn Statement 2023 will not have an impact of any significance for most individuals who are either saving for retirement or drawing incomes from pensions. However, it does highlight the government’s focus on the importance of positive outcomes for investors.
To assist with this, it was announced that the government will look into the prospect of a lifetime pension provider model. This would force employers to pay into an employee’s existing pension plan and in doing so they hope will reduce the perceived issue of small pension pots that savers may have accrued due to changes in employment. Given the additional administrative burden on the employer, and the existing rules that qualifying workplace pensions schemes must abide by, it feels that these changes may take some time to be decided upon and then implemented.
In the shorter term however, this does highlight the merits that the government perceive in pensions consolidation exercises, which is something that we at Mercer & Hole have been promoting for many years now. There are a number of advantages to be had from a sensible review of an individual’s pension arrangements from cost savings to potentially better performance to name just two.
Individual Savings Accounts (ISAs) are the other main tax-efficient investment vehicle aside from pensions. It was announced that the ISA investment allowances from 6 April 2024 would remain as they are now i.e. £20,000 for adults and £9,000 for JISAs. There may be minor increases in flexibility for ISA savers, further details of which will follow when they are confirmed.
If you feel that your pensions could benefit from a review, but are unsure of where to start, please speak to your usual Mercer & Hole contact or a member of our Financial Planning team.