There should be no further tax changes to pension contributions or benefits for the remainder of this Parliament, the National Association of Pension Funds said in its Budget submission.
The NAPF said next week's Budget announcement was a 'golden' opportunity for the coalition government to support pension schemes and pension savers through a package of measures to meet its objective of bolstering occupational pensions.
Any further changes to the tax system would start to seriously adversely affect middle earners, add significantly to the costs of running schemes and could not be justified, the NAPF Budget 2014 submission stated. It noted that over the past two years, the government had restricted the value of tax relief on pension saving, raising £1bn of extra revenue per year by 2016/17.
'This not only acts as a disincentive to save in a pension, but also adds considerable complexity and administrative burden to pension schemes,' the NAPF warned.
A further suggestion included in the NAPF submission was government help for defined benefit pension scheme liabilities. The association called on the government to issue more long-dated and index-linked gilts as part of the DMO's (the UK's Debt Management Office) financing remit.
To further support funds, the government and the DMO should consider selling government debt linked to the Consumer Prices Index measure of inflation. The NAPF wants government to think about issuing CPI-linked gilts and called for the government to consult with the pensions and insurance industry to determine how a CPI-linked market could be developed.
Ministers should also take action to ensure a transparent and efficient annuities market. The NAPF said: '[The government] should support employer-facilitated advice by clarifying the law and providing tax incentives to employers providing "at retirement" advice to employees.'
Additionally, the government should support future defined benefit provision by bringing forward legislation at the earliest opportunity that allows schemes sponsor to offer core DB for future accrual. For instance, allowing employers greater flexibility in DB scheme design, the NAPF said. 'This would be a significant deregulation measure for the government and moreover, could encourage those employees currently offering DB schemes to keep those schemes open.'
The NAPF also wants the government to actively support long-term institution investors like pension funds access to the market for infrastructure. On Solvency II, the NAPF said it remained concerned that the European Insurance Occupational Pensions Authority (EIOPA) continues to develop proposals that could have damaging consequences for UK pension funds.
Its report stated: 'We urge the government to continue to support the pensions industry in opposing proposals that would class infrastructure as a high-risk asset and therefore attract a significant solvency capital requirements. This would be damaging to the prospects for pension fund investment in infrastructure.'
