Chancellor Rishi Sunak has unveiled his Spring Statement for 2022. As the UK faces a record increase in the cost of living, we call for policy to go further to support pensions.
The new national insurance threshold will support women
At long last, the Spring Statement brings with it a tax change which will have a tangible impact on those who need it most. The new national insurance threshold will particularly support women, who make up a higher proportion of lower earners and have been left especially financially vulnerable following the pandemic. There may also be a gendered benefit of the fuel duty cut; women have high transport costs in our newly hybrid world given their tendency to take the brunt of domestic labour, including school runs and shopping trips.
These things will provide some relief during the cost of living crisis. They should also help improve the gender pensions gap in the long run.
From an employer perspective it is now more important than ever to consider analysing employees financial wellbeing so that benefit and reward packages can reflect current product and financial education needs.
"The change could make it more affordable for women to contribute more to their pensions, and will make salary exchange more effective. But there is still a long way to go to solve the issue. Employers need to do more to understand and reduce their gender pay gap. And for the next Budget, removing the minimum earning requirement from auto enrolled pensions, changing the state pension to better reflect career breaks, and moving to a flat rate of pension tax relief should all be serious considerations for the Chancellor to make the pensions system more reflective of today’s society and fairer to all."
Have Pensioners been forgotten?
Pensioners and those approaching retirement have been lured with ‘jam tomorrow’ by the Chancellor. Some will benefit from the reduced income tax rate, and when the triple lock returns next year there is likely to be a very healthy increase in pension payments; April 2023’s increase will be based on September’s 2022 CPI figure which is set to be close to 8% according to the OBR. A cynic might note this would be just in time for elections season.
In practice though, most pensioners have been left in the dust by the Government. Tax cuts and R&D policies will go little way to protect those in retirement from the spiralling cost of living and rising fuel bills, especially following the shift to a Double Lock which resulted in a lower pension income this year.
"There are also many questions left unanswered. What will the lower basic rate mean for pension contributions, and pension funds in the long run? Will the current arrangements to protect low earners from not accruing enough years to secure a full State Pension be fully honoured to those earning up to £12,570 a year? With only two mentions of pensions in the Red Book, the realities of those who are no longer working seem to have fallen off the Chancellor’s radar entirely."