PLSA comments on the Budget | Pensions and Lifetime Savings Association

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PLSA comments on the Budget

03 March 2021

Pensions and Lifetime Savings Association (PLSA) Director of Policy and Advocacy Nigel Peaple comments on the Budget.

Lifetime Allowance Freeze

“Given the pressure on the public finances it is not surprising that the Government has chosen to freeze the lifetime allowance. From the Treasury’s perspective, it will raise about £300 million per year by 2025-26. About 90% of savers will be unaffected so most people can go on saving in their workplace pension without worrying about the rule change. However, the freeze will affect about 10% of savers, usually those on higher salaries with a lot of pension savings, such as senior doctors; it will create extra costs for pension schemes; and piecemeal changes like this are unhelpful in sustaining confidence in pension saving.”

Green Gilts

“We welcome the announcement by the Chancellor that the Government will begin to issue Green Gilts this summer and issue more in the Autumn. In our 2020 report, ‘A Changing Climate’, we called on Government to make it easier for pension funds to invest in a climate aware way and, in particular, we asked them to introduce a Green Gilt. With new rules for climate disclosure coming into force for large pension schemes from October 2022, pension fund trustees need a broader array of investments to meet their climate ambitions. Green Gilts issued by the UK government will be particularly appealing for funded defined benefit pension schemes as they are lower risk when compared to investing directly in green energy projects. The plan to raise £15 billion this year is a very good start.”

More Flexible Rules for Pension Fund Investment

“In his speech, the Chancellor said that the Government would make it easier for pensions to invest in less liquid investments with benefits for UK growth. This relates to a forthcoming DWP consultation about the calculation of the 0.75% charge cap on pensions used for automatic enrolment and whether it should be amended to allow for performance fees to be smoothed over multiple years. This is a complex issue involving calculations of risk and return as well as fees. We will respond to the consultation when it is published in a few weeks’ time.”

Net Pay / RAS

“One thing not covered today was a Government decision on how to ensure people on low savings benefit from pensions tax relief regardless of the tax administration arrangements of their scheme. The pensions industry is united in believing the best solution is for HMRC to update its approach to granting tax refunds, the so-called P800 issue. We understand that HM Treasury is undertaking further assessment of this complex issue.”

Mark Smith, Senior PR Manager
 020 7601 1726 |  [email protected]k

Steven Kennedy, PR Manager
 020 7601 1737 | 07713 073024 | [email protected]