Pension savers have been issued an update as new Prime Minister Andy Burnham considers what policies to implement, with major reforms potentially on the way. Legislation has already been passed for a key change to how pension contributions work.
Immediate priorities
Mark Pemberthy, benefits consulting leader at consultancy firm Gallagher, shared his thoughts on what changes the Government could be looking at. He said: "The immediate priority is likely to be delivering the reforms that are already in the pipeline, rather than introducing a completely new pensions agenda."
"The sector is already preparing for changes covering value for money, the consolidation of small pension pots and better support for people turning their savings into a retirement income."
Key date ahead
He pointed ahead to a key date soon that the new PM may have his eye on. The expert said: "Pension policy plays out over the long term, so beyond that, the PM may wait for the findings of the independent pension commission next year before making significant policy promises. Their interim report has already identified significant risks facing future pensioners and their final recommendations will have a degree of independence which should enable the long-term political consensus needed for lasting change."
The commission is looking at a range of issues around making sure people have enough saved up for retirement, including both the state pension and people's private pensions. The interim report warns that current pension policy is "not grounded in clear objectives for adequacy or reviewed holistically".
'Higher taxation' warning
Another warning from the group is that the Government will likely have to choose from these options to make sure pensioners can pay their way:
- Higher taxation to support an ageing population
- Individuals and employers saving more
- Further rises in the average retirement age.
You can read the interim report in full on the Government website. The commission is expected to publish its final report and policy recommendations in Spring 2027.
Mr Pemberthy said it is too early to tell what changes the new PM will bring in around pensions. He said: "Burnham has made social care reform a clear priority but has yet to set out a detailed pensions programme, and while broader changes to the taxation of wealth and property are being discussed, it would be premature to assume that pensions tax relief or allowances will be changed."
"However, the estimated net cost of pension income tax and National Insurance contributions relief on pensions was £53billion in 2023-24, and rising, so they could come under greater scrutiny as the Government considers how to raise revenue to fund new initiatives."
