James Jones-Tinsley: Bracing for the Budget

When the Labour Party launched its pre-Election Manifesto in June, the main pensions-related commitment promised, “…a review of the pensions landscape.” Following their significant victory in early July, and ahead of the Parliamentary summer recess, the Chancellor Rachel Reeves spoke ominously about inheriting a “…£22 billion black hole” from the previous government and confirmed that the first Labour Budget for 15 years would be held on 30 October. Speaking from the Downing Street Rose Garden on 27 August, the Prime Minister, Sir Keir Starmer, informed those present that October's Budget will be, "painful" and that the government would have to make "big asks" of the public, who would have to "…accept short-term pain for long-term good." Having already announced - to different degrees of consternation from both sides of the House - that the government would remove the winter fuel payment from those not in receipt of pension credit or other means-tested benefits, Rachel Reeves fulfilled the Manifesto promise in mid-August by launching the terms of reference for ‘Phase One’ of Labour’s “Pensions Review.” But what is contained in Phase One, and does this reveal any suggestions that the taxation of pensions may be in the Chancellor’s crosshairs, given that she has already pledged no increases to Income Tax, VAT, or National Insurance? In essence, Phase One of the Review is focussed on investment, reporting its initial findings later in the year, and ahead of the introduction of a Pension Schemes Bill. Phase Two will start later this year and, alongside investment, will consider the further steps required to improve pension outcomes, including an assessment of “…retirement adequacy”. Pleasingly, the Chancellor has appointed Emma Reynolds, the Minister for Pensions, to lead the Review. You may recall that I focused on Ms Reynolds in my previous column, and particularly her joint tenure to two government departments, which will hopefully give the Review a long overdue degree of ‘joined-up’ thinking. The terms of reference state that the Review will focus on policy development in four key areas: • firstly, driving scale and consolidation of Defined Contribution workplace pension schemes; • secondly, tackling fragmentation and inefficiency in the Local Government Pension Scheme through consolidation and improved governance; •thirdly, the structure of the pensions ecosystem and achieving a greater focus on value, rather than cost, to deliver better outcomes for future pensioners; and • fourthly, encouraging further pension investment into UK assets, to boost growth across the country. Among other things, in developing its recommendations, the Review will have regard to boosting the returns for pension savers, the role played by pension funds in both capital and financial markets to boost returns and UK growth, and a “…wide range of external viewpoints, including employers, trade unions, the pensions industry, financial services, local government and consumer voices.” This is all well and good, but doesn’t really help pension providers and advisers in anticipating what the Budget implications will be for individual clients. I fully expect ‘the rumour mill’ to be in full throttle leading up to the October Budget, and the volume button is already being turned up, in respect of a possible revision to pensions tax relief. Although a move to a flat rate of tax relief for everyone, regardless of their marginal rate of Income Tax, would be fiendishly difficult to achieve within Defined Benefit pension schemes, organisations including The Fabian Society are already suggesting there should be a radical overhaul of the pensions system to make tax relief less generous to “better-off earners”, which they claim could raise at least £10 billion per year for the Treasury. Therefore, while the first phase of Labour’s Pensions Review primarily focuses on large scheme investment and consolidation, our focus must be on the impact of Labour policy-making on retail pensions, as the new government looks to their self-imposed finite ways of filling the purported financial ‘black hole’. James Jones-Tinsley is a technical specialist at Barnett Waddingham on SSAS and SIPPs practice areas. He also presents to clients, advisers and other professionals on pension matters, liaising with the media on changes to pension legislation. James D Jones-Tinsley FPMI APFS, This email address is being protected from spambots. You need JavaScript enabled to view it.

James Jones-Tinsley: Bracing for the Budget

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