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Pensions hints from David Gauke?

David Gauke, the Secretary of State at the Department of Work and Pensions (DWP) gave a speech at the Association of British Insurers’ long-term savings conference on 4 July 2017. Moving from HM Treasury to the department that is responsible for, among other things, pensions (auto-enrolment) and the State Pension, perhaps we can get a hint at future movements in these areas by looking at what he had to say.

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Auto-enrolment

The DWP is leading the 2017 review of auto-enrolment (AE). The scope of this was outlined in December 2016 by Richard Harington, the parliamentary under-secretary of state for pensions in the previous government. This talked about building on the success of AE and to “consider how the growing group of self-employed people can be helped to save for their retirement”.

 

The 2017 Conservative Party manifesto was more specific than just considering and said “we will continue to extend auto-enrolment to small employers and make it available to the self-employed”.

 

On 04 July 2017, Mr Gauke said: “The current review of automatic enrolment will help us to explore the best solutions for self-employed savers. In partnership with employers and industry, we are now in a strong position to build on the successes we have already seen, and set the future direction of the automatic enrolment scheme.”

Will this impact employers? Probably no more than the current consideration to include workers as well as employees. Although, you have to wonder whether employers will have to consider the AE entitlements for the people who are subject to the off-payroll working rules from 6 April 2017. We have to consider these (largely) self-employed people for tax, National Insurance and the Apprenticeship Levy so will we have to for AE as well soon?

 

State Pension age

In March 2016, John Cridland CBE was appointed by the UK government to carry out an independent review of future increases to the State Pension age (SPa). His report remit was to to be “forward looking and focused on the longer term”. As such, it will not affect or impact the timetable for SPa increases up to 2028 that are already in legislation and will remain unchanged. It may impact the increase planned between 2034 and 2036, courtesy of the Pensions Act 2007.

 

In Mr Cridland’s March 2017 review, he made a number of recommendations for post-2028 retirees (at which time the SPa will be 67). Re the SPa itself, he recommended that State Pension age should rise to age 68 over a two-year period starting in 2037 and ending in 2039. This will affect anyone currently under the age of 45.

 

On 4 July 2017, Mr Gauke said: “As we consider the repercussions of increased life expectancy on future generations, I welcome the contributions of John Cridland, and the government’s Actuary Department, to our thinking on the future State Pension age. It represents exactly the sort of longer-term approach I want to cultivate within my department, and across wider government.”

 

If SPA increases are on the government’s legislative agenda at some time in the future, it will be interesting to see how and if this progresses through parliament. This is with the backdrop of remembering there is a Conservative minority government supported to a limited extent by the Democratic Unionist Party (DUP) in Northern Ireland. While the DUP’s manifesto did not say anything specific about SPa increases, I think it is interesting to see they regard ‘older’ people as those reaching age 60. Indeed, this is the age that the free bus pass becomes available in Northern Ireland.

 

Further, the Labour Party has said they reject the findings of Cridland’s report and its 2017 manifesto said the party supports an independent review that considers “a flexible retirement policy to reflect both the contributions made by people, the wide variations in life expectancy, and the arduous conditions of some work”.

 

Although Mr Gauke may have hinted at it, if it ever gets off the ground this will be a bumpy and unpopular ride!

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