This year's budget announcements on pensions were well trailed so there were no big surprises. In his 2021 Budget Speech Chancellor Rishi Sunak has announced:
- The pensions lifetime allowance (LTA) will be maintained at its current level (£1,073,100) until April 2026
- The government is “taking steps to give the pensions industry more flexibility to unlock billions of pounds from pension funds into innovative new ventures”
HM Treasury’s Build Back Better plan for growth states that the government will “support access to finance to help unleash innovation, including through reforms to address disincentives for pension funds to invest in high-growth companies” recognising that “there remains a largely untapped pool of capital from institutional investors, particularly Defined Contribution (DC) pension schemes.”
The government “will consult in the next month on whether certain costs affect DC pension schemes’ ability to invest in a broader range of assets. This is to ensure DC pension schemes are not discouraged from such investments and are able to offer the highest possible returns for savers. The Department for Work and Pensions will also come forward with draft regulations that will make it easier for schemes to take up such opportunities.”
There had been some expectation within the pensions industry that the LTA would be frozen. It has however attracted some criticism as it will result in many more pension savers incurring tax penalties and comes only three years after the commitment to link the LTA to CPI. It has long been a Government ambition to encourage pension schemes to invest in domestic infrastructure, and this signals further commitment to that aim.
See Burges Salmon's recent series 'Perspectives on infrastructure' here.