Spring Statement 2025: No details on pension reforms yet
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The chancellor’s Spring Statement on Wednesday did not yield any updates on pensions policy, and the pensions industry now expects to see details about pension reforms in the coming weeks or months.
News about defined contribution and Local Government Pension Scheme consolidation and domestic investment is expected in the ‘spring’, but no response on November’s consultations was published with the Spring Statement on Wednesday.
The statement did not reveal anything about pensions other than that Labour is looking to reform the system to catalyse UK investment. Rachel Reeves’ determination to do so will only have grown, as the Office for Budget Responsibility has halved the UK’s GDP growth forecast to 1% for this year, while expecting growth to average about 1.75% over the rest of the decade.
In response to the speech, 10-year gilt yields rose at first but fell later, because of lower-than-expected gilt sales being announced which are dominated by shorter durations, according to Hymans Robertson. Longer-dated issues have been reduced to 13.4% of total issuance.
News about defined contribution and Local Government Pension Scheme consolidation and domestic investment is expected in the ‘spring’, but no response on November’s consultations was published with the Spring Statement on Wednesday.
The statement did not reveal anything about pensions other than that Labour is looking to reform the system to catalyse UK investment. Rachel Reeves’ determination to do so will only have grown, as the Office for Budget Responsibility has halved the UK’s GDP growth forecast to 1% for this year, while expecting growth to average about 1.75% over the rest of the decade.
In response to the speech, 10-year gilt yields rose at first but fell later, because of lower-than-expected gilt sales being announced which are dominated by shorter durations, according to Hymans Robertson. Longer-dated issues have been reduced to 13.4% of total issuance.
Pensions industry impatient to see government's plans
The pensions industry was not surprised by the silence on pensions at the Spring Statement.
Zoe Alexander, director of policy and advocacy at the Pensions and Lifetime Savings Association, said: “As was widely expected, the Spring Statement did not focus on pensions policy. We know the focus will return to pensions with the report of the Pensions Investment Review next month, and a pension schemes bill due to be introduced soon.”
Alexander noted that the reforms highlighted in the chancellor’s speech, including on planning, the National Wealth Fund, infrastructure and technology spending, were “all essential for creating a positive environment for the economy, with follow through benefits for pension fund investment returns”.
The pension reforms referenced in the chancellor’s speech “are commendable but must maintain a sharp focus on delivering tangible benefits for members”, stressed Helen Forrest Hall, chief strategy officer at the Pensions Management Institute.
The government must also consider the financial and operational burdens these reforms will put on businesses, considering sequencing and avoiding unintended consequences, she added.
Calum Cooper, head of pensions policy innovation at consultancy Hymans Robertson, said the chancellor’s silence around pensions was “disappointing” if not unexpected. He called for a timetable with detailed terms of reference and a firm start date.
Reeves previously said the government will publish a report on the pensions review in the “spring”, when it will also outline details about accessing defined benefit surplus.
Zoe Alexander, director of policy and advocacy at the Pensions and Lifetime Savings Association, said: “As was widely expected, the Spring Statement did not focus on pensions policy. We know the focus will return to pensions with the report of the Pensions Investment Review next month, and a pension schemes bill due to be introduced soon.”
Alexander noted that the reforms highlighted in the chancellor’s speech, including on planning, the National Wealth Fund, infrastructure and technology spending, were “all essential for creating a positive environment for the economy, with follow through benefits for pension fund investment returns”.
The pension reforms referenced in the chancellor’s speech “are commendable but must maintain a sharp focus on delivering tangible benefits for members”, stressed Helen Forrest Hall, chief strategy officer at the Pensions Management Institute.
The government must also consider the financial and operational burdens these reforms will put on businesses, considering sequencing and avoiding unintended consequences, she added.
Calum Cooper, head of pensions policy innovation at consultancy Hymans Robertson, said the chancellor’s silence around pensions was “disappointing” if not unexpected. He called for a timetable with detailed terms of reference and a firm start date.
Reeves previously said the government will publish a report on the pensions review in the “spring”, when it will also outline details about accessing defined benefit surplus.
Given the UK’s fiscal challenges, “the government will be anxious about running into phase two of the Pensions Investment Review. But they needn’t be”, Cooper argued. The adequacy part of the review could act as a growth catalyst, containing “a package of pensions measures that are attractive to savers, employers and government”, and which could “dovetail” with the state pension age review due next year, he said.
Mike Ambery, retirement savings director at Standard Life, also hopes to hear more about the adequacy part of the Pensions Review soon. “Increasing pension contributions right now at a time when economic growth is in short supply is a difficult message to manage, but ultimately action needs to be taken as only one in seven people are on track for retirement,” he said.
Mike Ambery, retirement savings director at Standard Life, also hopes to hear more about the adequacy part of the Pensions Review soon. “Increasing pension contributions right now at a time when economic growth is in short supply is a difficult message to manage, but ultimately action needs to be taken as only one in seven people are on track for retirement,” he said.
Death and taxes
Ambery warned against succumbing to the temptation of making changes to the tax system, as changes can be complex and raise issues around practicality, citing the inclusion of pensions in an estate for inheritance tax purposes.
“With the majority of UK adults undersaving for retirement, it’s crucial that policy around long-term saving serves to increase confidence in the pensions system,” he said.
Inheritance tax for pensions from 2027 will likely remain on the agenda as IHT has proven a valuable source of revenue for the exchequer. Stephen Lowe, director at annuity provider Just Group, pointed out that the OBR’s estimates IHT will raise an additional £2.44bn by the end of the decade, compared with last autumn’s forecast. With one in 10 (9.7%) deaths forecast to incur IHT on the estate by 2029-30, “it is clear that the tax is no longer restricted to the very wealthy and is beginning to take a bigger bite of Middle Britain’s wealth”, he remarked.
Whether it is raising existing taxes or introducing new ones, more taxes could be announced in the autumn.
Paul Johnson, director of the Institute for Fiscal Studies, said the combination of the government having “iron-clad” fiscal rules and leaving little headroom against them leads to political and economic uncertainty, as any small change in outlook needs to be balanced with a change in policies.
“We might be in for another blockbuster Autumn Budget. What the chancellor has all but guaranteed is another six months of damaging speculation and uncertainty over tax policy. That didn’t go well between last July’s election and October’s Budget. I fear a longer rerun this year,” he said.
“With the majority of UK adults undersaving for retirement, it’s crucial that policy around long-term saving serves to increase confidence in the pensions system,” he said.
Inheritance tax for pensions from 2027 will likely remain on the agenda as IHT has proven a valuable source of revenue for the exchequer. Stephen Lowe, director at annuity provider Just Group, pointed out that the OBR’s estimates IHT will raise an additional £2.44bn by the end of the decade, compared with last autumn’s forecast. With one in 10 (9.7%) deaths forecast to incur IHT on the estate by 2029-30, “it is clear that the tax is no longer restricted to the very wealthy and is beginning to take a bigger bite of Middle Britain’s wealth”, he remarked.
Whether it is raising existing taxes or introducing new ones, more taxes could be announced in the autumn.
Paul Johnson, director of the Institute for Fiscal Studies, said the combination of the government having “iron-clad” fiscal rules and leaving little headroom against them leads to political and economic uncertainty, as any small change in outlook needs to be balanced with a change in policies.
“We might be in for another blockbuster Autumn Budget. What the chancellor has all but guaranteed is another six months of damaging speculation and uncertainty over tax policy. That didn’t go well between last July’s election and October’s Budget. I fear a longer rerun this year,” he said.
What would you like to see included or dropped in the government’s pension reforms?
