Romi Savova, Chief Executive of PensionBee, said: “This was clearly a vote-gathering statement, with something for everyone, from pensioners, consumers and businesses to the self-employed. It feels a little bit like Santa came early this year.
With the inflation boogeyman still in the rearview mirror, the government must proceed with careful implementation of its pre-election giveaways. Consumers and pensioners will benefit from lower taxes and higher pension payments respectively, which will offer welcome respite from a persistent cost of living crisis. Having been burnt by the current cost of living, many consumers will direct additional contributions to their pensions in a bid to avoid retirement poverty.
There were also some promising incentives for businesses, with full expensing of capital expenditures but with an overwhelming focus on manufacturing sectors, which may leave some in the digital economy wondering if they were on Santa’s naughty list this year.
It is interesting to see pension reforms remaining high on the government’s agenda. With consumers potentially being given the right to choose their own pension provider to have their workplace pensions paid into, pension providers will finally have a greater incentive to compete in the areas that matter to consumers, which include convenience, product quality and customer service. For any pot for life proposal to succeed and truly empower consumers, a 10-day pension switch guarantee must be front of mind to enable savers to walk with their feet.”
Commenting on the impact for pension savers of the Chancellor’s announcements:
Becky O’Connor, Director of Public Affairs at PensionBee, said: “The advent calendars are not yet out, but the Chancellor has taken on the role of Santa in this Autumn Statement, with a surprise reduction in National Insurance contributions, which will have an almost immediate impact on millions of households’ disposable income. This could enable people to divert more of their money to savings, including pensions. The Chancellor’s pension reforms could further boost engagement levels in pensions, which should lead to better retirement outcomes.”
‘Pot for life’ pensions and Mansion House reforms
- Consultation on introducing a legal right for workers to have pension contributions paid into their own fund
“PensionBee research suggests that three quarters of people (76%) would consider having their own ‘pot for life’ pension (1).
Confirmation of the move towards allowing people to choose their own pension into which employers can pay in is welcome. More competition and engagement will benefit savers overall.
The Chancellor has given more much-needed detail on how he sees the investment proposals behind the Mansion House reforms playing out - but not quite enough.
Pension savers might not yet feel reassured that their retirement outcomes are at the forefront of these plans, as the Chancellor majored on the benefits to growth companies and mentioned they ‘also include outcomes for savers’, almost as an aside.
Big question marks remain over whether these investments are likely to deliver the promised returns. It will be the terms of the investment deals, including the fees charged, as well as the long term success of the underlying businesses, that will determine whether the ‘win win’ scenario the Chancellor hopes for, plays out.”
However it’s good to see more detail on how the investment opportunities are expected to get off the ground.”
Cut to National Insurance contributions for employees and the self-employed
Reduction from 12% to 10% in the basic rate of NICs
Abolition of Class 2 contributions and reduction in Class 4 contributions from 9% to 8% for the self-employed
“The surprise move to reduce the main rate of National Insurance paid by workers will have a much-needed positive impact on household disposable income. To abolish Class 2 National Insurance contributions and cut Class 4 contributions from 9% to 8% is another boost to income for the self-employed. Both these measures offer a meaningful boost to take-home pay. This could enable workers to save more of their money for the future.”
State pension triple lock honoured
“The decision to maintain the triple lock increase to the state pension at 8.5% in April, was an understandable call by a Chancellor with the luxury of some fiscal headroom heading towards a General Election.
This means that those in receipt of a full new state pension will see this rise to £221.20 a week, or £11,502.40 a year, bringing more pensioners into paying tax if their total income exceeds £12,570. Pension Credit will also rise in April 2024.”
Increase to living wage boost to pensions of lower earners
“The new rate of £11.44 an hour will result in an increase to the pension contributions of low earners through Auto-Enrolment, boosting not only their immediate income but long-term financial security.”
Footnotes
- PensionBee asked c.1,000 UK Pension holders on 21st November 2023. Nationally representative sample.
