The chancellor has already made three moves to gain more access to our pension pots. What kind of message does this send to savers?
The Government seems determined to use our retirement savings to fill the hole in the nation’s coffers.
Never mind the wealthy who hide their money offshore or the big companies that get away with paying little or no tax in the UK, ordinary folk just trying to get by seem to be constantly in their sights.
Every few months, it feels like they have found yet another way to try to target our savings and pensions.
In the space of less than a year, we have seen three major announcements that impact our pension savings.
First, they moved pensions into the scope of Inheritance Tax in a move that will see some retirees lose up to 67% of their funds to the taxman.
Second, there are plans to make it easier for Defined Benefit pension schemes to access their surplus funds.
If this goes ahead, these plans will allow companies to tap into an estimated £160 million of their pension fund surpluses for investment.
The change would provide a big boost to the Treasury’s coffers as they will be subject to a 25% tax charge, but critics have warned it could leave previously well-funded schemes under-resourced.
Thirdly, the Government's plans would effectively allow it to influence where some of our pension cash is invested. While the benefits for the Government are obvious, it's not clear whether this would necessarily be in the best interests of pension savers.
Reeves targeting salary sacrifice schemes
And the pensions tinkering might not end there.
Chancellor Rachel Reeves has also undertaken an inquiry into workplace pensions and is thought to be targeting the salary sacrifice schemes used by staff at an estimated 50% of UK businesses.
In salary sacrifice schemes, staff forego a portion of their income in exchange for non-cash benefits, such as pension contributions.
By doing so, employees and businesses reduce their liability for National Insurance and taxation.
The Government recently published a research report commissioned by HMRC, entitled 'Understanding the attitudes and behaviours of employers towards salary sacrifice for pensions.'
The research tests employer reactions to three imagined scenarios where salary sacrifice has been cut back.
The changes could cost the average worker over £500 a year in additional Income Tax and National Insurance, reducing their pension savings.
While the previous Conservative Government commissioned the research, it’s telling – and worrying for pension savers - that the report has been published not long before the Autumn Budget.
Pension saving should be prioritised
We should be encouraging people to save, especially for their retirement, not putting obstacles in their way.
Many of us are not saving enough as it is, and that's without the chancellor making pensions less desirable options.
Research earlier this year by pension planning firm Pension Potential found that 13 million Britons do not have enough retirement savings.
Nearly two-in-five working-age adults were found not to be saving enough for a comfortable retirement.
With life expectancy increasing – people on average now live for twice as long (20 years) as they were expected to from retirement when the State Pension was introduced in 1908 (10 years) – it is imperative to promote pension saving, not deter people from doing so.
What message does this send to savers?
With the Government’s plans to let companies help themselves to pension surpluses and also influence where money is invested, pension savers’ money could be put at risk and/or invested for political reasons rather than to maximise investment returns.
What’s more, won’t all this focus on raiding our pension savings ultimately make saving for retirement less appealing?
With the ageing population growing, is this really the message we should be sending out?
True, the Government’s finances need to be boosted somehow, and it’s clear how empty they are looking, but is damaging the prospects for retirees now and in the future really the right way to go about it?
There's a real danger they could just be setting us up for a pension-funding disaster further down the line.