07 March 2024
Quantum Advisory, the leading independent financial services consultancy, share their thoughts on yesterday’s spring budget
All quotes to be attributed to Simon Hubbard, Principal Consultant.
“Further reductions in National Insurance contribution rates will be welcomed by many. The change, at face value, indirectly makes saving into a pension less attractive for employees where contributions are paid before the deduction of tax and National Insurance through an arrangement known as salary sacrifice. This change reduces the National Insurance that employees save by using such an approach.
These tax cuts must be viewed alongside the freeze on income tax thresholds until 2027. Given this, we expect that salary sacrifice arrangements will remain the most efficient way for employees to pay their pension contributions and there is no impact on the National Insurance savings made by the employer.
Cuts in National Insurance will only benefit income earned through work, so pensioners will not benefit in the same way that employees do.”
“The announcement from the Government will help concentrate DC pension funds on delivering the best returns for members whilst encouraging further investment in the UK economy. We welcome the aim to target good investment returns for every member. Careful consideration will need to be given in the coming months on how to encourage this for DC Schemes whilst allowing funds to invest in long-term growth assets that may be volatile in the short-term.”
“The abolition of the LTA will as a whole, simplify the pensions industry and encourage more to save for retirement and work for longer. It remains to be seen whether this policy will change if there was a new government following the imminent General Election, given the Labour party’s opposition to the abolition of the LTA.”
“The triple lock guarantee for 2024/25 (which the Labour Party has also committed to retaining) will ease pensioner fears, particularly given the recent years of high inflation. Whilst this news will be welcomed, wider issues remain with the functionality of the State Pension, which is becoming increasingly more expensive in real terms due to current birth / death rates. We expect there will be further discussions around the State Pension following the election.”
“We look forward to the Government providing further detail on the lifetime provider model they have set out, noting that challenges with economies of scale will need to be carefully managed. This will help people who change jobs frequently or who have multiple jobs at any one time, because under the current system some workers can end up with a large number of small pensions which can be difficult to manage and to keep track of.”
– ENDS –
