Pension: Rishi Sunak may address ‘thornier issues’ after triple lock decision | Personal Finance | Finance
The Government is reckoning with numerous financial issues including the cost of living crisis and high inflation. However, a key issue for many people is the future of pensions, and what could be next in this year’s Budget.
Express.co.uk spoke exclusively to Iain McLellan, head of research and development at Isio, who weighed in on what the Prime Minister could tackle next.
He said: “Following the Government’s unsurprising triple lock announcement in November’s Autumn Statement, we’re looking forward to the Chancellor taking the opportunity to address some of the thornier pensions issues in the upcoming Budget.
“The recent increase in income tax for higher earners is a complicated subject for those who are also members of pension schemes.
“While it makes tax-efficient savings via a pensions scheme relatively more attractive, the charge for breaching annual allowance has gone up and we expect pay inflation to result in more members being impacted.
READ MORE: State pension ‘headache’ with triple lock and retirement age chaos
Pete Glancy, head of policy at Scottish Widows, also stated this allowance may be a “focus” going forward when speaking with Express.co.uk.
He explained: “Addressing the imbalance caused by current Lifetime Allowance rules should also be a focus. The current limit is set at £1,073,100, after which savers can face a tax penalty of 55 percent.
“In today’s economic environment defined by high inflation, this means that highly paid professionals risk penalties if their pots merely keep pace with inflation.
“Highly skilled and highly paid workers – such as doctors, scientists and engineers – are thereby discouraged from working longer to avoid increasing their pensions savings above the limit.
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“Put simply, this discourages some of our most valued specialists from working longer, at a critical time when the UK simply cannot afford to lose these workers.
“If tax penalties are allowed to increase in line with inflation, experienced workers who have left the labour market will have less incentive to return.”
When it comes to the state pension, Patrick Luthi, CEO of NOW: Pensions told Express.co.uk the organisation would like to see the introduction of a family carer’s top up.
While those who take time out of work to care for their family are compensated with state pension credits, they end up missing out on auto-enrolment.
Mr Luthi stated a top-up of this kind could see the Government pay the equivalent of the employer’s contribution at the same level as the National Living Wage into carers’ pensions, equating to £280 per year and boosting pension outcomes.
Mr Glancy also expressed concerns about what the current climate could mean for state pensions.
He added: “Looking to the long-term, the decline in value of private pension pots will have major implications for state pensions too. More people will be relying on them as well as other benefits.”
However, inflation continues to run rampant, causing problems for the Government and Britons alike.
It is this issue, Mr Glancy stressed, which must be addressed first before moving on to any other concerns.
He explained: “Inflation will naturally be the primary priority for the Chancellor this year and it must be reined in urgently, not least for the fact that it is so detrimental to pensions.
“The Office for Budget Responsibility forecasts inflation rates to be 7.4 percent this year.
“That means that if you have £100 in your pension pot now, this will only have the relative buying power of around £92.60 this time next year.”
