Autumn Statement expert view: The provider
In the context of the several ongoing regulatory and government consultation papers relating to pension providers and distributors, the Chancellors’ autumn statement was fairly quiet.
For a market that is still settling into the pension freedoms changes this will be welcomed by many.
For pensions, thankfully, there were no shocks. The changes to stamp duty, a 3 per cent increase, changes for buy-to-let and second homes will help reinforce the value of pension savings and making adequate personal provision. A secondary effect here could be the passing on of this cost to future tenants.
The rise in basic state pension is welcome but should not be confused with having enough retirement provision to allow people to have their desired standard of living.
There is a great deal of research showing that people continuously under save and over estimate retirement provision.
The delay in auto-enrolment increases will be welcomed by employers trying to cope with implementation. However, individual members should be reminded that a regular review of personal contribution rates is critical to influencing the desired outcome of auto-enrolment in better retirement provision with personal choice.
The government’s welfare cap is to be breached by the implications of abandoning the tax credit so its worth now seriously considering how insurance has an important role in providing the right type and level of safety net that modern households need, but which a taxpayer funded State model struggles to provide.
As government looks to reduce the cost of welfare budget to taxpayers, ensure a more resilient society yet still ensure a safety net for householders, there is a clear role for insurance to contribute to new safety net solutions. But, suitable incentives would need to be in place, rather than deterrents such as the effect of universal credit which now treats payment from income protection as “earned income” and acts as a disincentive to those who choose to take it out.
On a wider financial services point, hidden away in the detailed document, is a significant implication for car insurers. The government will introduce measures to end the right to cash compensation for minor whiplash injuries and expects the insurance industry to pass an average saving of £40 to £50 for each motor insurance policy on to consumers. This is a significant announcement but, as ever, the devil is in the detail and the government plans to consult on the details in the New Year.
Meanwhile, the commitment to providing a ‘digital tax account’ is a significant step forward, especially when considered with the work on pension’s passports; digital passports; pension finder project; automated advice; and the call for a pensions dashboard. We are fast approaching an age when people will be able to make important decisions based on real data. At this point people will be making truly informed decisions.
Phil Brown is head of transformation and policy for LV=
