PENSIONSANDSAVINGS.COM

8 March 2017

Another missed opportunity to start addressing social care

• No new incentives for social care savings and radical reform proposals pushed into Green Paper later this year
• No proper help for savers – new NS&I bond pays interest rate lower than inflation, so savers lose money
• Costs of public sector pensions will rise sharply, by nearly 40% between 2015 and 2020
• Self employed bearing brunt of tax rises to pay for other measures

Addressing Social care crisis:

• Extra £2billion for social care will help councils but may not be enough to ensure NHS pressures really relieved.

• No new help or incentives for families to save for social care or use their ISAs and pensions.

• More money for councils to cover costs of social care is good, but proper reform delayed – more money is just a sticking plaster on a weeping wound.

• Will be a Green Paper later this year on radical structural long-term reform. That’s good but needs to be followed by urgent action as care system is breaking the NHS. Integration of health and care, helping families prepare for care costs, finding ways to recover extra money to pay for care – all these are essential as our population ages. The number of people over age 75 will increase by 2million in next 10 years.

• No help for families to start saving for care – no incentives to help them save even though ‘death tax’ ruled out so can’t take money from their homes or estates.

 

Measures for savers

• No new help for savers even as savings ratio reaches such low levels

• New NS&I bond pays only 2.2% interest while inflation forecast to be 2.4% this year and 2.3% next year, so savers lose money in real terms each year

 

Helping people extend working lives

• The Chancellor has announced £5million extra money for returnships for adults trying to get back into work. This is potentially good news for older people and other adults trying to return to work, especially helping many older women and carers who want to work after taking time out for caring. Of course, more is needed but this is a start. For example, if each returnship costs £250, this can help 20,000 people.

 

Pension matters

Pensions flexibility is raising far more money for Treasury than originally forecast.

• Treasury expected pension flexibility to raise £0.3bn in 2015-16 and £0.6bn in 2016-17, but people have taken higher amounts out than previously forecast, so actual tax receipts were £1.5bn in 2015-16 and £1.1bn in 2016017. One cannot draw many conclusions from this as we do not know what the people who withdrew money will be doing with it – whether they have other pensions elsewhere and are repaying debts and so on. The Government needs to conduct some proper research into what people are doing when withdrawing pension money. Expected revenues from pension flexibility rules are expected to be £1.6bn in 2017-18 and £0.9bn in 2018-19. Again, we cannot draw firm conclusions without further information.

 

Costs of public sector pensions set to rise sharply.

• The Budget figures list the costs of public sector pensions as follows. In 2015-16 the cost was £11.3bn but by next year that will have risen by over 20% to £13.7bn. By 2021-22, the cost is forecast to rise to £15.7bn, which is an increase of 39% over the 2015-16 level.

• 2015-16 £11.3bn

• 2016-17 £11.5b

• 2017-18 £12.1bn

• 2018-19 £13.7bn

 

Overseas pensions:

• The Government is continuing its clampdown on overseas pensions. Anyone who wants to move their UK pension offshore into a ‘Qualifying Registered Overseas Pension Scheme’ (QROPS) will have to pay a 25% tax charge on the funds transferred, and also any payments made from the QROPS in the first five years after the money is transferred will be taxable in the UK.