Welcome news on state pension and pensions tax, but concern that pensioners lose out - NAPF’s reaction to the budget

The National Association of Pension Funds (NAPF), the UK’s leading voice of workplace pensions, today (Wed) reacted to the Chancellor’s Budget.

All quotes are attributable to Joanne Segars, NAPF Chief Executive.

STATE PENSION REFORM

“Today’s announcement is a breakthrough moment for pensions in the UK. At long last, people will know that it pays to save.

“The new state pension will take millions of people off means-tested benefits. It will encourage people to start saving and to save more for their old age. A simple, more generous state pension will be a major step forward in tackling the nation’s pensions crisis. And it will ensure that auto-enrolment, due to start later this year, is a success.

“The NAPF has been campaigning for a more generous single tier state pension for many years and we welcome today’s announcement.

“The Government is to be congratulated for taking this bold step.”

SIMPLIFICATION OF AGE-RELATED ALLOWANCE

“It is pensioners who are the biggest losers in today’s Budget. Over the course of this parliament pensioners stand to lose over £2bn in age-related tax allowance. This will come as a blow to millions of pensioners who have paid in to the tax system throughout their working lives.

“Pensioners with modest amounts of pension saving stand to be the biggest losers.”

PENSIONS TAX REGIME

“We are pleased that the Government has listened to the NAPF and others in the pensions industry and has resisted the temptation to tinker with tax rules for pensions. Such a move would have further undermined confidence in pensions on the eve of the introduction of auto-enrolment which should bring the benefits of pension saving to 8 million working people.”

INFRASTRUCTURE

"The Pension Infrastructure Platform is an exciting opportunity that could bring real benefits to UK pension funds. It will provide the long term inflation-linked cash flows which pension funds need.

“Since signing the MoU with the Treasury in the Autumn, we are making good progress on the development of a pension infrastructure platform. We are working with a core of 10-12 pension funds and the PPF on the details of the Platform.

“The Platform, which will be owned by pension funds for pension funds, will seek to invest in a wide range of infrastructure assets. It aims to raise £2 billion which could be leveraged up to £4 billion of new money for investment in infrastructure and be open for business in early 2013.”

AUTOMATIC REVIEW MECHANISM FOR INCREASING  STATE PENSION AGE

“As we all live longer it is inevitable that we will have to work longer. However, it is important that any further increases to the state pension age are handled fairly by giving people enough time to plan their retirement.

“An automatic review mechanism for increasing the state pension age should give people more notice of future changes so that they can prepare for retirement and make their financial plans.

“We will need to study the details when they are published this Summer.  In particular, we will want to be clear that it does not throw up unintended consequences or disadvantage certain groups of people.”

ULTRA LONG BONDS

“Bonds in excess of 50 years and perpetual bonds are unlikely to be attractive to most pension schemes.

“Pension funds are unlikely to be willing to lock in today’s low interest rates over such a long period. Most final salary pension schemes are now closed to new joiners and are becoming more mature. Their liabilities are long-term, but not that long-term.

“Instead this Budget should have helped pension funds by announcing a significant increase in the issuance of 30, 40 and 50-year index-linked debt, which is what pension funds are seeking.”

 

Notes to Editors

The NAPF is the leading voice of workplace pensions in the UK. We  speak for 1,200 pension schemes with some 15 million members and assets of around £800 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.

 

Contacts:

Christian Zarro, Press Officer, NAPF, 020 7601 1718 or 07825 171 446, [email protected]