After days of feverish speculation about what would be in Jeremy Hunt’s autumn statement we’ve been given a comprehensive set of measures that could make a huge impact on our retirement planning.
One of the first things the chancellor announced was that state pensions would increase in line with the triple lock. Under the triple lock the state pension rises by whichever is the most of 2.5%, inflation and average wages. Inflation may be falling but red-hot wage growth means pensioners are in line for a blockbusting 8.5% increase next year.
For someone on the full new state pension this would see their pension grow from £203.85 to £221.20 per week. For someone who hit state pension age before 2016 their full weekly basic state pension would rise from £156.20 to £169.50.
This news will come as a real relief to pensioners concerned by the impact of the ongoing cost of living crisis on their incomes. There had been concerns that the government may choose to break with the triple lock in a bid to contain burgeoning pension costs and opt to use a lower figure instead.
A pension is for life
Another widely trailed announcement was around lifetime pensions which gives people the opportunity for people to choose a pension that they contribute to throughout their working lives.
This is different to the current situation where you have a different pension with every employer. As you move jobs over time there is an increased chance that you could lose track of one and potentially leave yourself thousands of pounds worse off in retirement.
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Having one overarching view of your pension means you have a better idea of what you really have, and this can mean you make better retirement decisions. It has the potential to plug the flow of lost pension pots that means there is an estimated £26bn of lost pension money currently washing around the system.
Lifetime pensions deliver all important choice. Those who don’t want to nominate a pension provider can still save into their employer’s pension scheme, but it delivers much needed flexibility to those who need it.
More choice for investments
We also heard more about government plans for pension schemes to invest more in UK businesses with announcements around investing in science and technology as well as the development of a Growth Fund within the British Business Bank (BBB).
The idea is that investing in these businesses will not only boost the economy but people’s pension pots too though there have been industry concerns that any decisions to invest in these assets are done with the member’s best interests at its centre.
This along with previous government announcements around getting schemes to invest in more illiquid assets means we could see the investment landscape for pensions looking very different in the future.