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IPE special report May 2018

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NAPF fears over stakeholder

Concerns have been raised by the UK National Association of Pension Funds (NAPF) and consultant William M Mercer that radical government tax proposals for pensions could cause a potential reduction in occupational provision.
Whilst welcoming the thrust of the government’s revised plans to have a single tax regime under which contributions of up to £3,600 per annum will not be linked to earnings for all pensions other than final salary schemes, Peter Thompson, senior consultant and actuary at Mercer, notes: “We would be concerned if this led to a cut-back in occupational pension provision. Some employers may decide that the simplicity and low charges of stakeholder pensions make them more attractive than final salary pensions.”
The NAPF, in a ‘cautious’ embrace of the proposals, which also state that all contributions to DC schemes will be paid net of basic rate tax, says the change will help the government target funded retirement provision to those outside the present system such as carers and non-working spouses.
Stakeholder schemes will also now benefit employees able to afford only small contributions, the NAPF acknowledges.
Nevertheless the association believes the proposals do not go far enough. Alan Pickering, NAPF chairman, says: “We are really disappointed that having acknowledged the validity of these aims, the government seems unwilling to extend them to the nine million members of defined benefit schemes. These schemes have contributed significantly to the growing prosperity of today’s pensioners. Why are they being left out in the cold when it comes to simplification and parallel membership?”
He welcomes the government intention though to leave the question of parallel membership open for the time being. “They appear to have left the door ajar. During the next few weeks we will try to persuade the government that parallel membership of defined contribution schemes will be a real help to those who move in and out of different types of employment.”
A recent survey by UK consulting actuary Jardine Reeves Brown of 216 pension plans with assets of £135bn appears to confirm the fears, with 16% of respondents believing that the introduction of Stakeholder pensions will cause them to review their main pension provision.
Just over half (53%) said they were uncertain about how they would proceed, stating that it was too early to say.
Hugh Wheelan

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