Pensions round-up in #SpendingReview 2015
In contrast to recent budget speeches, which have included significant changes to pensions policy, the pensions announcements in this spending review do not herald any major new policy developments. However, the government has moved forwards on its plans to introduce pooling in investments for local government pension schemes. In addition, the consultation launched in the summer on pensions tax relief – which could have significant implications for pension schemes and beneficiaries – is still outstanding, and the government will publish its response at Budget 2016.
The State Pension is being raised by £3.35 in line with the triple lock (meaning it goes up by whichever is the highest of inflation, average earnings or 2.5%) to £119.50 per week.
The new single-tier pension that will be received by those reaching pension age from April 2016 onwards will set at £155.65 per week.
Pension credit which tops up the state pension for lower income pensioners is being increased, bringing the Standard Minimum Guarantee (ie, the minimum income for pensioners) to £155.60 per week, in line (almost) with the single-tier pension.
Automatic enrolment into workplace pension schemes is being introduced on a gradual basis, starting with the largest employers, with minimum contribution rate increases built into the system. The Chancellor has announced today that the next two contribution rate increases will be aligned to the tax year and will therefore take place in April rather than October, with the aim of simplifying administration of auto-enrolment.
Local Government Pension Schemes – investment pooling
In the July budget, the government announced its intention that the Local Government Pension Schemes should pool investments to reduce costs. Today the Chancellor announced that these pools should take the form of up to six British Wealth funds each with assets of at least £25 billion and has invited proposals for investment pooling from local authorities. These proposals will be judged according to criteria also published today. In summary, these cover achieving the benefits of scale; strong governance and decision-making; reducing costs and value for money; and an improved capacity to invest in infrastructure.