Prospect Pension

@David_J_Robbins The estimated impact of moving to RAS schemes alone must qualify as "extreme" on any risk rating.

OBR gives the Budget's pension salary sacrifice costing a "medium-high" uncertainty rating.

@David_J_Robbins Should have FOI'd HMRC at the same time! (I presume it's PTM data - or whatever they use now - underpinning the reporter £2bn estimate for capping at £2k.)

This ONS FOI response (not to me) could be more helpful ahead of the Budget. Yes, we collect data on use of salary sacrifice for pensions. No, we don't process it.

@PensionsDave @David_J_Robbins Playbook suggests it's WASPI related.

@David_J_Robbins I'd forgotten the "toy boy" tax. That made me chuckle.

Contrast "pensions update" with the much clearer titles for other statements due today. Suggests HMG either wants to hide it as much as possible (probably) or wants the surprise factor.

@David_J_Robbins Harder with existing staff (as would require a contractual change) but difficult for HMRC to make it impossible for a determined employer (with a well-advised employee who was confident all potential issues had been squared off)?

@ProspectPension Yes, that will happen with new employees (as the SPP paper said this week) where employers are prepared to tailor the offering. Harder with existing employees but job churn may erode revenues over time.

"Reeves has decided not to cut tax-free lump sum withdrawals". Capping salary sacrifice to £2k would mean: - Original contract says £50k salary + £5k employer pension contribution; no NICs due on pension contribution (as now) - Original contract says £53k salary + £2k employer pension contribution; employee wants to sacrifice £3k of salary for an extra £3k employer pension contribution, to end up with the same £50k + £5k. If only £2k can be sacrificed, the other £1k has to be salary used to fund an employee contribution and is therefore subject to employee and employer NICs.

@Pension_Jon @David_J_Robbins That some schemes didn't have pre-97 protection is no argument for taking it away entirely from those that did. The government could just grant protection to those schemes that originally had it. But it would seem very petty to enforce that distinction in today's circumstances.

@ProspectPension @David_J_Robbins PPF compensation aimed to cover a basic DB benefit. Significant minority didn’t have increases pre 97 hence is a benefit improvement (no reasonable person should think PPF compensation should be a higher benefit than original pension!).

Even if prices stay flat this month, annual CPI inflation in the year to May would be 3.2%. May is the reference month for PPF compensation increases, so the 2.5% cap on post-97 increases will bite meaningfully. (And calls for pre-97 indexation, about which HMG now sounds less enthusiastic, will be amplified).

@Pension_Jon @David_J_Robbins You can argue that the overall level of PPF protection is about right, too high or too low (reasonable people can have different views about that). But the lack of indexation of pre-97 rights is grossly unfair and a very poor feature of the design of the scheme.

@Pension_Jon @David_J_Robbins Not the tens of thousands of PPF and FAS members who have had no increases ever on what is often the main part of their retirement income.

@David_J_Robbins Something about the effect of the unwinding of the discount rate in the accounts...

@David_J_Robbins The lack of impact on year 4 to 5 is what confused me (up to then I had thought the fiscal effect would be positive). TUC pension officers had a helpful meeting with PPF officials, and they gamely tried to explain their understanding of it to me (but I didn't follow it fully).

@David_J_Robbins @HawthorneSJJ "In a recent poll of 1,000 members of defined benefit schemes, conducted by the Pension Insurance Corporation, 60pc said the Government’s plans would put their pensions at risk." And 100pc of Pension Insurance Corporations said it would put their bottom line at risk...

While the Chancellor probably will be able to anticipate some revenue from these changes, "Reeves's new £40bn tax grab" is a silly headline. £40bn is 25% of the £162bn aggregate surplus of schemes whose assets exceed low dependency liabilities, estimated by TPR as at 30/09/24. 1) The headline assumes that every scheme with a low dependency surplus will refund every penny of it to the sponsor. They won't. 2) The £162bn includes £97bn of buyout surpluses, which could usually be refunded to the sponsor on wind-up anyway. 3) Even without market volatility, the numbers are sensitive to measurement error: ~£50bn would be shaved off the £162bn if ONS's asset estimate at the same date were substituted for TPR's.

@David_J_Robbins IFS v GAD seeing as it was the methodology that GAD advised ONS to use that the IFS attacked (in a very over-the-top way)?

Oral evidence session with ONS and IFS to follow, once Frank Warren is free to promote it?

@David_J_Robbins @ONS Hutton himself said the SPA link should be reviewed in the future in order to ensure it remains appropriate (it isn't any longer, and a review would highlight that, but it would obviously be politically difficult to acknowledge it).

Agree. I should check the Hansard re: how strongly it was implied that SPA would rise with life expectancy when the 2013 public sector legislation went through. This might also be grounds for questioning the 10 years' notice principle. People affected by the rise from 66 to 67 only got slightly more notice than that and the life expectancy projections used now look very wrong (which could have happened in either direction). Obviously there shouldn't be a big change at a moment's notice, but is 10 years' notice for any change whatsoever excessive? (I haven't seen Labour commit to at least 10 years, though I think Liz Kendall once suggested that 15 years would be more appropriate. After this week's news, maybe the Chancellor would think a decade's notice is consistent with an increase above 67 in 2030 in any case...)

When Parliament legislated for State Pension Age to reach 67 in 2028, men aged 67 in 2028 were projected to live for 21.3 years on average and women for 23.8 years. On today's @ONS projections, it's 18.6 years and 21.1 years. So down 2.7 years, which is one eighth for men. (That's not to say the rise should not go ahead. E.g., expected public sector debt and fertility have also changed for the worse.)

@jeff_106 @paullewismoney Being a member of a very good occupational pension scheme was not a big scam.

@ProspectPension @paullewismoney And that's why our pensions are at a reduced level. Contracting out was a big scam that wasn't sold properly

Latest DWP figures for May 2024: 2.6million people got a weekly state pension above the personal tax allowance, about 1/4 of old state pensioners and 1/10 of new state pensioners. 45% of new state pensioners got less than standard £221.20/wk, 38% of old state pensioners got more

@SjScholefield @David_J_Robbins Otoh - the fact that so many people are facing such cost of living pressures that they are giving up something as valuable as membership of the NHS pension scheme just to get their member contributions back is actually one of the surest signs that something should be done.

@SjScholefield @David_J_Robbins On top of the issue with fiscal rules - the fact that HMT is effectively getting this for "free" from lots of workers in the NHS, may make it even less inclined towards the policy (ie there would be a sunk cost to the extent that lots of people currently opted out take it up).

Interesting paid now / paid later trade off. For many the bird in the hand will win out…. thetimes.com/uk/politics/ar…

@SjScholefield @David_J_Robbins That said, opt outs in the NHS scheme are scandalously high and presumably everyone currently giving up a valuable DB pension just to get the member contribution back would absolutely jump at this type of arrangement.

@SjScholefield @David_J_Robbins The issue is probably that *any* take-up is problematic in the current fiscal environment. The choice already exists in places (eg civil servants can increase net pay by joining the non-contributory DC scheme called Partnership) and take-up there is very low.