Today’s workforce ‘largely forgotten’ by budget, says CIPD
Institute claims Osborne’s plans too focused on younger people, while experts reveal hidden changes to public sector pensions
Chancellor George Osborne’s eighth budget was met with dismay from CIPD chief economist Mark Beatson, who said there was too much focus on young people.
“The chancellor said this was a budget for the next generation, and the result is that today’s workforce has been largely forgotten,” he added. “They aren’t the only show in town.”
Highlights of this week’s budget include the creation of the Lifetime ISA, which people under the age 40 can use to save towards their retirement or a house deposit, matched by a 25 per cent bonus from the government, payable on deposits of up to £4,000 per year. Osborne also announced that the ISA limit would increase to £20,000 in an acknowledgement of the “agonising choice” for young people who are struggling to save for both their retirement and to buy a house.
“It gives people flexibility about how they juggle their assets between pensions and housing – if they have assets,” said Beatson.
“The ISA could change saver behaviour but only for those with savings already. Some just don’t have the money to save, so the ISA seems better for people who are ‘almost there’ with saving for a [house] deposit or their retirement, which is typically those with better jobs, better education and a better background.
“But I question whether the chancellor should be looking at wider investment and helping workers develop their skills to boost their earnings.”
While pensions reform didn’t hit the headlines immediately after the budget, more in-depth analysis has revealed that the chancellor snuck in changes to public sector pensions.
Osborne declared in his speech that the government wants to see an increase in pension contributions from public sector employers, so that the cost of providing public sector pensions is fairly reflected by the contributions made by employers. This would entail a reduction in the public service pension scheme discount rate, which is set to cost public sector employers £2bn a year in 2019-20 and 2020-21.
However, much to the relief of industry experts, there were no changes to the pensions tax relief system.
“Although it was rumoured that the chancellor had his eye on scrapping salary sacrifice for pension purposes and ending national insurance relief on employer contributions, it appears that he has decided not to proceed,” said Malcolm McLean, senior consultant at Barnett Waddingham. “Given the damage that this might have done to pension saving and the willingness of employers to support and maintain their pension schemes, this is welcome.”
Story via – http://www.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2016/03/17/today-s-workforce-largely-forgotten-by-budget-says-cipd.aspx