PensionsMar 13 2019

No mention of pensions in Spring Statement

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No mention of pensions in Spring Statement

Chancellor of the Exchequer Phillip Hammond (pictured) delivered a Spring Statement speech heavily focused on Brexit, and while some new policies were unveiled, no changes are due on pensions or social care.

Gregg McClymont, director of policy at master trust The People’s Pension, said he anticipated that today’s statement would be overshadowed by the UK’s decision to leave the European Union, but warned "long-term thinking is crucial in pensions policy".

He said: "It’s disappointing that the government didn’t take this opportunity to offer a good news story by undertaking to extend auto-enrolment to the thousands of workers not currently covered by the scheme."

In December 2017, the Department for Work and Pensions (DWP) published its auto-enrolment review, which announced a series of measures the government was looking to implement to bring more people into auto-enrolment. 

This included lowering the age of workers auto-enrolled into workplace pension schemes from 22 to 18 years, and calculating contributions from the first pound earned, instead of the current £10,000 lower earnings threshold.

And while these were only expected to be introduced in the mid-2020s, Mr McClymont warned it was "vital that the government delivers on its promise".

Guy Opperman, minister for pensions and financial inclusion, told MPs in Parliament yesterday (March 12) the government needed to weight up the consequences of the contributions increase to 8 per cent in April, which was why it has not scrapped the auto-enrolment lower earnings limit.

He said: "This is quite a complicated process; it will genuinely take the best part of nine months to go through all the data and get a definitive understanding of where we are on the 8 per cent. At best, I will not know the degree of opt-outs until Christmas.

"It seems utterly wrong for me to seek to change the nature of the legal basis until I have a real understanding of the impact of the 8 per cent increase."

While pensions were absent from Mr Hammond’s speech, social care received a mention, but only to say it would be considered as part of a comprehensive spending review, if the UK manages to broker a deal with the EU before leaving.

Steven Cameron, director of pensions at Aegon, suggested this meant the long overdue green paper was further delayed.

The publication of this paper was originally expected in the summer but has since been pushed back to the autumn, and the government has since hinted the publication could be delayed further due to "unforeseen circumstances".

Several solutions for the care funding problem are said to be on the table, including the ‘Care Isa’ – a capped savings product, exempt from inheritance tax – and a 'care pension', which mixes drawdown and care insurance.

Mr Cameron said: "The government urgently needs to put the future funding of social care on a sustainable footing. Our ageing population deserves clarity on what the state will pay for and what individuals will have to fund themselves, based on their wealth.

"An increased commitment to government funding would be very welcome, and we also need a cap on the overall amount anyone will have to pay themselves, allowing people to plan ahead and protect inheritance aspirations.

"This is a major issue which will make a huge difference to the futures of millions of individuals across the age spectrum long after Brexit."

The government has already said the future model of social care won’t be solely funded by taxpayers.

It is estimated just 12 per cent of adults aged 55 or over are currently putting aside money to pay for social care later in life.

Former prime minister David Cameron had promised to implement a cap on the cost of care of £72,500, which was supposed to come into effect in April 2016.

But in 2015 the government pushed this back to 2020, because it would have added £6bn to public sector spending at a "time of consolidation".

In December 2017 the government confirmed the proposed cap would be scrapped while a green paper on long-term reform was put together.

Rachael Griffin, tax and financial planning expert at Quilter, said: "The Chancellor’s words were as reliable as a weatherman’s with the forecasts and announcements having the potential to be blown away overnight depending on whether a Brexit deal is sorted.

"Gratefully social care got a cursory nod as the Chancellor announced a three year spending review to be published alongside the next budget. Having a clear vision on how much the government is willing and able to spend on social care will enable policymaking."

maria.espadinha@ft.com