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What the 2018 budget means for our pensions

The team at Quantum Advisory in Birmingham analyse the chancellor’s 2018 budget

The biggest announcement of the Budget was to increase personal tax allowances from April 2019 to the level the Government had previously promised to reach in 2020.  This means a personal tax-free allowance of £12,500 and a higher rate threshold of £50,000.  The move could save £1,600 per year in tax for a higher rate taxpayer.

Ban on pensions cold-calling

The Government has previously consulted on a ban for pensions cold-calling, and it published its response to the consultation alongside the Budget documents.  The Government intends to proceed with the ban and has published draft legislation.  Some respondents to the consultation asked for the ban to be extended to other financial services, but it will remain limited to pensions for now.

Simon Hubbard, Senior Consultant and Actuary at Quantum Advisory, said: “Pensions are often the second most valuable asset people own after their house, and for some they are their most valuable asset.  The complexity of pensions makes it hard to distinguish a genuine opportunity from a convincing fraud, and the cold-calling ban is a welcome step towards protecting savers.”

Pensions dashboard

The Government confirmed the DWP’s support for a centralised ‘pensions dashboard’ where people can see their pension pots in one place.  The Budget sets aside funding to support the project and a consultation will follow later this year.

David Deidun, Partner at Quantum Advisory, said: “Most people have a number of different jobs in their working life and each might come with a separate pension arrangement.  Progress towards a central system to view these pensions is welcome.  It should help people keep track of their savings and make sure they have enough to live on in retirement.”

Pensions for the self-employed

The Government announced that it will publish a paper in the winter setting out its plans to increase pension provision for the self-employed.  With auto-enrolment improving pension provision for many workers, the Government is keen to somehow extend this to the self-employed.

Long-term pensions investment

The Government launched a feasibility study on how pension schemes could pool investments in very long-term investments and start-ups.  This should offer potential high returns for investors who are comfortable with the risk of investing in new, innovative companies.

Stuart Price, Partner at Quantum Advisory, said: “Pension scheme investments are generally long-term, but most assets available to members have a much shorter term. Making longer-term assets available will be welcomed by some investors who are comfortable with the risks of investing in start-up companies.”

Increased costs for public service pensions

The Budget confirmed the Government’s intention to reduce the discount rate used to value public service pensions.  This will increase the cost of staff pensions for Government departments.  The Treasury will provide funding to the NHS to protect them from this.

Brexit

As noted in the press beforehand, the Budget assumes that the UK will agree a deal with the EU before leaving.  In the event of a ‘no-deal Brexit’ we should expect that another Budget will be needed to support the economy.  The Chancellor hinted that this might mean upgrading the spring statement to a full Budget.

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