There was no news about pensions in the Autumn Budget and industry opinion is divided on whether this was good news or a missed opportunity to incentivise people to save.
In his second Autumn Budget speech chancellor Philip Hammond sought to address inter-generational fairness, ensuring next generation Britain was not lagging behind previous more prosperous societies.
While the chancellor announced a raft of measures for first-time buyers, including a stamp duty cut on houses worth up to £300,000, there was remarkably little news about pensions.
The chancellor made no new policy announcements and even resisted the temptation to tinker.
Not even a consultation on any form of pension reform was announced.
For Darren Philp, director of policy at The People’s Pension, this was nothing short of a missed opportunity.
He said: "With an ageing population and 14 million Brits unlikely to have enough to live on in retirement, the chancellor’s lack of action to support long-term savers is incredibly disappointing."
Mr Philp was keen to see any indication a reform of pensions tax relief was in the works.
Changing tax relief on pensions has been on the government's cards for the past few years.
In early 2016 HM Treasury, under then-chancellor George Osborne, launched a consultation paper on the issue.
However, the process was shelved following the surprise result of the European Union election in June 2016.
Mr Osborne was exploring options of turning the system on its head to resemble an Isa-style system, where savings are taxed at point of entry but tax free at withdrawal.
A third option explored was a flat rate of tax relief set at about 30 per cent.
Mr Philp said: “The current system is unfair for lower earners and so unclear that most people are not aware of the benefit.
"A flat rate system, set at between 25 to 30 per cent and presented as a simple bonus or top-up, would have made a firm statement in support of auto-enrolment and helped more people to save for the future."
Former pensions minister Baroness Ros Altmann agreed the chancellor missed a raft of opportunities, particularly for social care.
She said: “There was an opportunity to help people to set aside some of their pensions for social care, and allow people to take out money tax free if they need to spend it on care. But we didn't get anything like that, there were no savings incentives.
"At the moment, nobody has any money saved up for social care, they are not even thinking about it. The government doesn't talk about it, there aren't any products that help you save for care, nothing.
"So, it could be a huge shock to families when they suddenly discover that they need to find big sums of money if one of their love ones can't live independently anymore."
Others in the industry, who had been hoping for no news after successive years of tinkering with policy following the pension reforms, were more upbeat about the Budget.
Despite favouring a flat-rate option for pension tax relief, Bradbury Hamilton managing director Sheriar Bradbury said he was happy no major changes were announced.
“No news is good news as far as I am concerned because the one thing they were never going to introduce is a flat level of tax relief on pensions,” he said, while acknowledging it would have been difficult for the government to make any major changes affecting higher rate taxpayers - traditionally the heartland of Conservative voters.
“It’s difficult for them, the government has got a very small majority,” he said.
Provider Prudential was similarly relieved about the the Budget.
Pensions expert Graeme Robb said: “We are happy with what the chancellor announced from a financial services perspective. We were looking for no nasty surprises. We want an environment that is stable where people can really think in the long term.”
With regards to the lack of any new incentives for younger people to save into a pension, Mr Robb said it was good to have no added complexity, which could have been counterproductive to people’s saving behaviour.
Getting people to save was more of an educational task, which the industry should take on to convey to people the benefits of planning for their retirement early, he said.
Besides, “it’s not just the young people saving into their pension, it could be their grandparents as well,” he said. “It’s about opening up to the family, having that intergenerational tax planning in place.”
Hargreaves Lansdown pension analyst Nathan Long hinted at further announcements from HM Treasury further down the line.
He said: "Whilst no changes are welcome, there was no mention of the self-employed joining the auto-enrolment regime. All eyes turn to the review of auto-enrolment the results of which are due in early December for further clues."
Royal London director of policy, and former pensions minister, Steve Webb agreed.
He said: “From an auto-enrolment point of view, next April is a crucial time."
However, he added the chancellor missed the opportunity to cushion April’s blow by boosting people's income.
From April 2018, the minimum total contribution will increase from 2 per cent to 5 per cent, with the employer paying 2 per cent.
One year later, it will increase again to 8 per cent, with the company paying 3 per cent.
“The obvious way of [cushioning the blow] would have been to raise the personal tax free allowance - all he has done was to put that in line with inflation,” he said.
“If he had increased it further, when people have their pensions contributions increase next April, the hit on their take home pay would have been smaller, and that would have meant fewer people opting out.”
Additional reporting by Maria Espadinha
carmen.reichman@ft.com, maria.espadinha@ft.com
