UK government is looking for ways to cut the costs of pensions for the exchequer.

UK government is looking for ways to cut the costs of pensions for the exchequer.

It is clear that the UK government is looking for ways to cut the costs of pensions for the exchequer. While seeking to boost investment in the wider economy.

The 6 key areas with proposed changes are:

1. Salary sacrifice – allows employees to reduce their taxable income in exchange for higher pension contributions. The UK government is looking to either cap or stop this.

2. Tax relief on pensions – UK government is considering introducing a flat rate for everyone. Most probably a single rate of 25% - 30%.

3. Asset allocation – UK government would like to mandate investments in UK companies with a 10% minimum allocation.

4. Closure of some smaller workplace pensions – the pension bill requirement for defined contribution schemes to have a mega fund with a minimum of £250bn AUM from 2030.

5. Consolidation of local government pension schemes (LGPS) – UK government is seeking to consolidate 86 LGPS into 6-8 pools to create mega funds and unlock lower costs.

6. Extending CDC pension remit – UK government plans to extend collective defined contribution to multi-employer schemes.

The UK government will at some point increase the state pension age. Around the world governments have increased their ages to cut costs. It would be naive to think the UK government is not considering further increases too.