How Monday’s Queen’s Speech could affect personal finances

Writer, Tom Selby
Wednesday, October 9, 2019 - 14:48

Assuming we finally get a Queen’s Speech on Monday, any impact on our personal finances is likely to come via a Pensions Bill setting out the Government’s legislative priorities for savers and those already in retirement.

 

What are some of the key areas a Pensions Bill could focus on?

The Government wants to introduce the principles of Open Banking into the pension system through the creation of Pensions Dashboards. A Pensions Bill will likely include legislation requiring providers to offer-up data to make this happen. This is a long-term project, however, and implementation will be phased over a period of 3-4 years. Furthermore, the first versions of Dashboards – which are due to be tested later this year – are likely to be basic in the extreme, providing a simple ‘find and view’ service rather than detailed information.

Pensions minister Guy Opperman has also thrown his weight behind ‘mid-life MOTs’, a financial health-check carried out by some employers voluntarily for those roughly in the middle of their working lives. A Pensions Bill could turn this into a requirement, potentially meaning employees would be entitled to a range of in-work guidance on a variety of issues, including their finances.

A Pensions Bill could also provide the rules necessary for so-called ‘Collective Defined Contribution, or CDC, pension schemes. These are pensions which sit somewhere between old-style defined benefit, where savers receive a guaranteed income for life paid directly by their employer, and modern defined contribution arrangements, where individuals can pick their own investments and take responsibility for their retirement outcome.

The pensions minister has also suggested a new Pensions Commission will be needed to take automatic enrolment, the Government’s flagship retirement reform, into its next stage. While this is unlikely to appear in the Queen’s Speech, any future commission must encompass the entire pensions framework, including tax relief, and focus on simplification and encouraging more people to save for retirement.

New laws are deemed necessary to allow CDC pensions – which tend to target a level of income in retirement without offering explicit guarantees – to be offered in the UK. Royal Mail has pledged to shift its members to a CDC scheme once the rules are in place, although there has been little sign of significant demand from other employers.

We are unlikely to see significant upheaval for people’s pensions in the Queen’s Speech. While changes to things like reform of pension tax relief and abolishing tax-free cash have been mooted by ‘think-tanks’, they would require significant consultation. Similarly, major changes to the state pension – for example a further increase in the state pension age or change to the triple-lock – is extremely unlikely.

These articles are for information purposes only and are not a personal recommendation or advice.


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Written by:
Tom Selby

Tom Selby is a Senior Analyst at AJ Bell. He is a multi-award winning former financial journalist specialising in pensions and retirement issues. Tom has over five years experience working at Money Marketing magazine, where he became the Head of News in 2014. He has a degree in economics from Newcastle University