Life & Pensions Newsletter - September 2024

Once again, pensions funding and deficit remains the leading theme in terms of mentions between July and August, with 396 stories, followed by State and Pensions (source: Brandwatch). This comes as no surprise since many are anticipating substantial changes to the UK pension system as we approach the upcoming Autumn budget, with discussions around adjusting pension tax relief possibly by introducing a flat rate, and revising the annual allowance on pension savings.

Chancellor Rachel Reeves is reportedly exploring pension scheme consolidation and new policies like the FCA's "traffic light" system, fuelling comparisons to Canadian and Australian models.

Although the government has already said it doesn’t want to burden working people, which safeguards income tax and National Insurance. Still, this could potentially mean that pensions will be put under pressure, with the annual allowance and pensions tax relief being the target of change according to Helen Morrissey.  For instance, the potential reduction of the annual allowance from £60,000 to £40,000, coupled with the shift to a flat rate of pension tax relief, could significantly impact higher earners and public sector workers. Conversely, these changes might actually benefit lower earners, a perspective summarised by Dan Neidle, tax lawyer at Tax Policy Associates, who refers to this as the "Jenga Theory". Each reform could have wide-reaching effects on different groups of savers, bringing with it significant political and financial consequences.

Additionally, the UK government has launched a pension credit awareness campaign this month to mitigate the impact of its decision to means-test winter fuel payments, which will now only be available to those on pension credit. As expected, this change has sparked significant backlash, with concerns that many pensioners might struggle to afford heating this winter. Despite maintaining the triple lock on pensions, critics argue this won't compensate for the loss of the universal winter fuel payment. The campaign aims to encourage eligible pensioners to claim pension credit before the December deadline to receive the winter fuel payment, while also dismissing misconceptions about eligibility.

Therefore, it is crucial that any pension reforms consider the balance between encouraging saving and maintaining trust in the system. While aforementioned reforms may be necessary, they must be approached with caution to prevent destabilising the entire pension landscape.

Furthermore, the topic of investing in UK markets has once again resurfaced this month. Future Planet Capital (FPC) has launched the British Co-Investment Fund (BCF) to provide UK pension schemes with a new ways to invest in high-growth private UK companies. Partnering with pension solutions provider Mobius Life, the fund aims to channel up to £1 billion of pension investment into the UK's most impactful businesses, addressing recent government calls to unlock pension capital for private markets. The BCF will offer a unique opportunity for corporate, Local Government Pension Scheme (LGPS), and defined contribution (DC) pension schemes to support significant fast-growing businesses across sectors like AI, quantum computing, and climate technologies. This initiative marks a unique approach in venture capital, with FPC and Mobius Life working together to enable access to venture investments for pension savers and ensure the UK remains a leader in global innovation.

This now means that pension schemes have a newly found opportunity to invest in some of the UK's private sector, potentially leading to higher returns for their members. By blending these high-growth investments with more traditional assets, pension schemes can diversify their portfolios while still meeting necessary fee and liquidity requirements, which aligns with government objectives but also, helps pension schemes contribute to the growth of cutting-edge sectors, ensuring they are part of the UK's future innovation landscape.

Total mentions by topic (July - August)

• Pensions funding and deficit saw the greatest number of mentions between July and August with 396 stories, followed by State Pensions with 287 stories.

Examples of Pensions funding and deficit mentions this month

• ​Josephine Cumbo - UK’s biggest private pension fund dumps £80mn of Israeli assets
• Paul Lewis - It is truly appalling that private employers take advantage of auto enrolment rules to pay these negligible sums into their employees’ pensions. A decent pension needs something like 25% of pay going into it. How are they allowed to get away with it?
• Stephen Phillips - Pensioners feel betrayed; used by Reeves to help ‘fix the foundations’ of an economy that certainly isn’t as broken as she claims. And to part fund whopping pay rises to millions of public sector workers with gold-plated pensions