Written by Jon Dean on Wednesday 16 November 2016
It’s that time of year again when we are all asked to comment, ahead of the autumn statement, on what outcomes we expect to see the Chancellor announce. I have provided, what I hope, is a reasonable view of what we can expect. However, as we near the festive season I do have a Christmas wish - I’d like Hammond to announce a consultation on increasing the minimum auto-enrolment contribution rate above 8% after 2019. Any hopes for that?
Here we go, my top 5 autumn statement predictions impacting the UK pensions industry:
- No shock announcements likely
As Chancellor, Philip Hammond appears to be quite conservative with a small ‘c’. As such, I’m convinced there will be no shock announcements of new products including variants of ISAs, and no plans for immediate major pension tax reforms.
- LISAs full-steam ahead
We already know that plans for a secondary annuity market have been scrapped. I believe LISAs will be launched as planned - several major firms (including Hargreaves Lansdown) are committed to entering this market but some will not be ready for an April launch.
- Restructuring of Government finances
Hammond has stated his intentions and given himself more room to manoeuvre by setting expectations for a fiscal ‘reset’. This is likely to mean restructuring of longer term government finances and a steer on fiscal targets to replace Osborne’s budget surplus objectives. Long-term stability in the public finance is good news for financial markets.
- Government investment in infrastructure
I expect to see announcements on additional government borrowing for infrastructure investment (partly as a result of Brexit). Defined Benefit (DB) pension funds and insurers are amongst the most likely buyers of long-term bond issues like these.
- Employment support - measures to help low earners
Given the new Prime Minister’s talk of helping the less well-off, Hammond could announce measures to help lower earners and jobseekers (particularly those on disability benefits). Any reversal of benefit cuts will have a knock-on impact on public sector borrowing, and therefore the bond market.
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