Increase in National Minimum Wage

Commenting on the announcement of an increase in National Minimum Wage in today’s Budget, Michael Ambery, Partner, says:

“Today’s announcement is good news for low-wage workers after a turbulent eighteen months, with many of them hit hard during Covid. We are concerned, however, that the announcement has failed to adequately address the ticking timebomb around pension savings, particularly for younger workers. It yet again misses the opportunity to highlight the importance of planning financially for the future. The PLSA’s ‘Hitting the Target’ campaign as part of their Retirement Living Standards outlines the need to increase pensions contributions to 12%, and today’s announcement could have been a chance to encourage workers achieve this. We’d like to see the government commit to supporting a centralised campaign with a strong message that pensions, and longer-term planning must be at the heart of good financial education. This would help to eradicate the belief that a comfortable income in retirement is easily achievable with current pensions savings levels.

“Auto Enrolment has been an undoubted success, and the increased contribution levels since its introduction are testament to this. But it shouldn’t be seen as ‘job done’. Work must continue to ensure further participation, particularly for younger and low-wage workers, to ensure growth and increasing engagement. It would have been good to see that recognised by the government today.“

Guidance update to DWP regulatory charge cap for pension schemes

Commenting on the guidance update to DWP regulatory charge cap for pension schemes as mentioned in today’s Budget, Callum Stewart, Head of DC Investment, says:

“We support greater transparency in fees as the level of fees paid will have an impact on members’ long term outcomes. However, it is vital that we put charges in the context of long term member outcomes. It may well be right for a member to pay higher charges if the investment strategy that creates these higher charges will deliver a better long term return, net of fees, for that member. We have seen a race to the bottom in terms of fees over recent years and getting the focus back onto outcomes is really important as part of this debate.”

Announcement surrounding illiquid assets

Commenting on the announcement surrounding illiquid assets in today’s Budget, Callum Stewart, Head of DC Investment, says:

"In today’s Budget, Rishi Sunak sounded his intention to relax DC charge cap rules to ease the potential for greater levels of investment in illiquid assets. Although this is driven by government policy, we believe there are attractive opportunities available to improve outcomes for individual members. In particular, with the creation of new long-term asset funds, DC schemes will be able to access investments that could improve returns net of costs and charges over the longer term.

“As well as improving their financial outcomes, there is a golden opportunity to improve engagement with members. Individual DC savers have been expressing to the industry that they want their money to have a positive impact on the world around us, and illiquid investments provide an effective means to achieve this.

“Some of the historic barriers to accessing illiquid investments are easing, and we have seen great examples already of DC schemes accessing these assets to improve outcomes for their members. Now is the time to explore this exciting development for those with the governance capacity to do so. Although costs and charges are likely to be higher than most existing DC funds, we believe in this instance it’s possible to pay more and get more for DC savers.”

Announcement of a top-up for low earners in Net Pay arrangements

Commenting on the announcement of a top up for low earners in Net Pay arrangements, Mike Ambery, Partner, Hymans Robertson, says:

“It is great to see the government announcing that it’s at last abolishing this inequality for low earners in respect of net pay arrangements (rather than Relief at Source). We support every incentive for individuals to save and engage with pensions and have been calling for these technical inequalities to be eroded for many years. It will be very welcome news for just over a million people saving into pensions. It is just a shame that these savers will have to wait for three years for the changes to actually come into force and to be finally able to benefit.”