AXA Wealth says that the Chancellor could have done more to encourage pension saving in his Autumn Statement today to ease the pain of a higher retirement age.
As reaction comes in to the Autumn Statement, given by the Chancellor George Osborne in the Commons today, many have said that it was inevitable that people would have to work longer before retiring but more needs to be done to overhaul pension saving. Some providers affected by other announcements have been more positive.
AXA Wealth believes more could have been done to boost pension saving. Paul Riddell, director, AXA Wealth, says: "Nobody will be surprised to hear about the changes announced in the Autumn Statement. We are all expecting to work later and later in life. What isn't clear is how the government and pensions and savings industry is going to work closer to encourage more people to save appropriately for the future.
"We all need to think longer and harder about how we will fund our retirement and we all need to accept that it will not come as early as we might like. There is no doubt that without the right planning, that starts at an early age, people will need to accept that they will be working well into their 70s."
"The term 'state pension' is increasingly becoming out-dated. It sends out a message that people may be able to rely on it as their sole pension income. This just isn't the case. A more realistic message that we need to help people understand is that the Government will provide a 'later life income supplement' to your own personal provision. The state benefit may support your 'life' but it's highly unlikely to support any kind of 'lifestyle'."
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Ray Chinn, LV='s head of pensions and investments, said individuals needed to reassess their retirement plans in view of an increasingly higher state retirement age.
He said: "Although the state pension age does not dictate when someone can retire, the rise in the state pension age means that many may need to reassess their retirement plans. Our research found that the average 50 year old would like to retire at age 61, but expects to retire at 65. For future generations to be able to do this they will need to have sufficient private provisions, making it even more important that they engage with the retirement saving and planning process earlier."
However, he added he too was disappointed that the Chancellor missed an opportunity to overhaul pension saving and retirement planning. He said: "The decision not to change the way in which drawdown limits are calculated is disappointing and will mean people are still at the mercy gilt yields which bear no relation to how their drawdown funds may be invested."
Responding to other pension changes made in the Autumn Statement itself, TISA director general Tony Vine-Lott was more positive about a lifetime allowance move.
He said: “We are pleased that the government is to introduce individual protection (IP14) from April 2014 as a consequence of the reduction in the lifetime allowance to £1.25 million. This will mean that individuals with IP14 will have a lifetime allowance of the value of their pension savings on 5 April 2014 subject to an overall maximum of £1.5 million. However, given the reduction in contribution levels from 2014 it is questionable whether a lifetime cap will be necessary going forward.
“The confirmation that the government has stood by its pledge to increase Isa, JISA and CTF subscription limits in line with the Consumer Prices Index (CPI) is good news for savers. It is also pleasing that the maximum monthly amount that an employee can contribute to Save As You Earn savings arrangements is increasing from £250 to £500 from April 2014.”
The new subscription limits from 6 April 2014 will be: Adult Isa - £11,880, Junior Isa / CTF - £3,840
The property industry expressed concern over plans to charge capital gains tax on foreign residential investors from April 2015 but has welcomed the Chancellor’s decision to at least consult on the proposals before their introduction.
The BPF had warned the Treasury that the tax rise would raise little money and risked undermining the UK’s status as a country that was ‘open for business’ unless introduced in a sensible and measured way.
A move by the Chancellor to scrap stamp duty on ETFs went down well with the ETF sector, however.
Mark Johnson, head of UK sales at iShares, commented: "We welcome the news that, starting from April, the UK government will remove the stamp duty and stamp duty reserve tax on purchases of shares in exchange traded funds (ETFs), which would currently apply if an ETF were domiciled in the UK. This should ultimately increase consumer choice and support the growth in the use of ETFs by a wide range of investors from retail through to pension funds and insurance companies."