Spring Budget 2024: Insights for pensions & retirement?

Pensions reform

“While investing in domestic stocks can be a beneficial way to unlock pension capital, and generate strong returns for savers, the requirement for DC and local government pension funds to publicly disclose their investments shouldn’t be the start of the government directing exactly where funds should be allocated.

“Although the Chancellor’s concerns around the performance of DC schemes, and his decision to bar poorly performing DC schemes from new business are valid, any investment decisions should be taken for financial reasons because individuals deserve a strategy that maximises the potential value of savings accrued by retirement. Any future initiative that encourages investing in UK-listed companies should remain voluntary, evaluated on a case-by-case basis, and preserve trustees’ fiduciary duty to their members.”

‘Pot for Life’

“Discussions surrounding the ‘pot for life’ plan in the spring budget suggest a positive outlook for those who eagerly await the scheme. And, if implemented correctly, it is true that the proposals have the potential to enhance pensions engagement.

“The proposals could allow individuals to have more visibility and control over their wealth. By transforming accumulations of ‘small pots’ into one large pot using the lifetime provider model, the initiative could bring simplicity to pension schemes, evoking an increased sense of ownership for individuals.

“However, we need more clarity on how this will work in practice, given that the proposal requires intensive planning and poses high risks if not implemented well. Careful consideration needs to be taken when building the required infrastructure for the initiative, and the government must not underestimate the magnitude of this job, nor the importance.”

“If done properly, the lifetime provider model could solve major issues, such as avoiding the proliferation of multiple ‘small pots’. However, we must not ignore practical concerns. The industry must address several barriers before any meaningful reform can take place.

“A truly useful lifetime provider model will hinge on functional infrastructure. To ensure that contributions are distributed to each employee’s ‘pot for life’, we need a robust pension clearing system underpinned by a large technology project – something that neither the pension industry nor public sector has the best track record on, which is a real concern.

“A lifetime provider model always comes with the risk that certain employees will miss out. Larger employers can leverage their workplaces to negotiate great value for their employees, securing benefits long after a person has left employment. If members choose their plans, charges could skyrocket, especially without the support of an employer to assist them in their negotiations. If market forces are not as effective at driving competition, it is the members who will foot the bill.”

Triple lock

“Retirees will be pleased to hear the Chancellor’s reinforcement of his commitment to the state pension triple lock. Particularly with the recent cost-of-living challenges, the government’s announcement will comfort pensioners at a time when many are struggling to make ends meet.

“However, the government still needs to highlight the steps that need to be taken to ensure the state pension is sustainable. The cost of the state pension as a percentage of GDP is on track to increase by over 50%, so plans must be put into place to ensure its survival and to ensure it doesn’t cause financial strain further down the line."