It has been a good budget for pensions, if not for pensioners. The much-feared assault on higher rate tax relief did not materialise, leaving some to speculate that the Chancellor’s coffers are not as bare as had been feared. Healthcare and group risk professionals will also be pleased that insurance premium tax has been left alone again too.
Crucially for the auto-enrolment initiative, the all-powerful Treasury has now signalled its support for a flat-rate pension at £140 a week. Treasury support had always been considered the stumbling block in implementation, with many commentators unsure that pensions minister Steve Webb would be able to get support for a change that will see more paid to some groups who do not need it. It looks like Webb’s argument that winners and losers from state pension changes should not be treated in isolation seems to have hit home.
That is not to say it’s a done deal. The Government clearly has a battle on its hands if it is to reopen a wounding battle with public sector unions over NI rebates. It may endeavour to justify the change in the same way it has the reduced annual allowance, which is positioned as a universal measure, not a public sector one.
Crucially for the auto-enrolment initiative, the all-powerful Treasury has now signalled its support for a flat-rate pension at £140 a week
The Budget could have other ramifications for pensions. Raising the threshold at which people start paying income tax is of course welcome. But it could create complexities for low earners in occupational schemes who earn just enough to be auto-enrolled this year, but find they fall below the income tax threshold next year, thereby losing tax relief.
It is not yet certain whether the auto-enrolment qualification threshold will go up with the personal allowance for income tax. If it does, complexity will be created, although employers will save costs as less staff become eligible. But if the qualification bar rises too high, some of the target market will be missed.
John Greenwood, editor
john.greenwood@centaur.co.uk