DC schemes must start preparing now for impact of the Budget
10 Oct 2024
Every DC pension scheme should prepare for the impact of changes in the forthcoming Budget, warns Hymans Robertson as it releases its latest paper. With an expectation that the UK’s pensions system will come under the spotlight on October 30th, the leading pensions and financial services consultancy outlines how potential changes to taxation of the pensions system could affect DC schemes – and how it could affect individuals who save with these schemes.
The paper sets out five possible examples of changes to taxation of the UK’s pension system and considers their impact. These potential changes, their meaning, and what DC schemes should consider are set out below:
| Possible Change | What should employers consider? |
|---|---|
| Removal or reduction of National Insurance (NI) savings on employer contributions |
|
| Flat rate tax on pensions |
|
| Reduction in the tax-free cash allowance on pensions |
|
| Inclusion of pensions in the Inheritance Tax (IHT) regime |
|
| Pension tax credits on UK investments |
|
Commenting on the importance of DC schemes preparing for the upcoming Budget, Hannah English, Head of DC Corporate Consulting at Hymans Robertson, says:
“It is crucial that DC pension schemes prepare for the Budget in advance. While we do not recommend that employers make changes before the Budget is announced, we strongly recommend that they start to consider now what the budget may mean for them and their employees. This will enable them to act quickly once the announcement is made on the 30th of October.
“Some of the changes we examine in this paper could have a direct impact on the efficiency of pensions savings. This, coupled with the complex nature of pensions, could result in some savers becoming more susceptible to scams or making illogical pension decisions. As an antidote to this, we advise that firms review and update any communications to their members. They should ensure they are kept up to date in the run up to, and on Budget Day of possible changes – but encouraged not to take knee jerk decisions now in anticipation of a change that could not come.
“We would advise DC schemes to examine whether they could use modelling tools to help savers understand their savings, and how their savings could be affected by policy changes announced in the Budget. This would allow savers to think through what they will do with their pension pots in light of the announcement on the 30th October. As the old saying goes, failing to prepare is preparing to fail – and nowhere is this more pertinent than on Budget Day.”
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