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Budget pension tinkering will continue warns Aberdeen's McClymont

Budget pension tinkering will continue warns Aberdeen's McClymont

Government will only stop tinkering with pensions if life expectancy was to decrease, according to ex-shadow pensions minister Gregg McClymont.

Speaking one week before chancellor Philip Hammond delivers his Budget, McClymont (pictured) warned there was unlikely to be stability on pension policies. 

‘Unless there is actually a reduction in life expectancy as opposed to a slow rate of increase, government is going to keep coming to look at the cost of pensions,’ he said. 

According to McClymont, who is is now head of retirement at Standard Aberdeen Investments, pension expenditure makes up roughly 20% of public expenditure. 

He told the audience at the event hosted by discretionary fund manager comparison site Discus this meant Hammond and his successors would continue to see pension spending as a target. 

‘I am asked by those advising on retirement finances “how are we supposed to do this job with such constant tinkering?” But sadly I do not think the rule changes will stop coming any time soon because pensions cost a significant deal of money, more than you might think,' MyClymont said.

‘As a percentage of gross domestic product, pension spending is over 8%. £108 billion is spent each year on state pensions alone. When you include all the other pension areas pensions make up broadly £150 billion of the total £750 billion public expenditure.

‘It is that crude number which at one level drives the perennial interest of government in pensions.'

Commentators have long expected a Budget overhaul of pension tax relief, but so far Hammond has avoided making any changes

He also argued the fact pensioners are no longer likely to be poorer than a working person and the fact younger people are more likely to vote, will lead politicians to seek ways to cut spending on pensions.

‘Up until recently I would have presented this sort of information and then said “but the fact older people vote in much greater numbers, means I am doubtful about how much will change based on this sort of analysis.” The recent election though, gives one pause for thought.

‘Over time, the spend on pensions has gone up and up and up. The spending on children has come down and down and down. That is because of changes the coalition government made to the social security system which reduced, in real terms, working age benefits to those on low incomes. Spending on working age adults has flat lined over the last 20 years.

‘If you put that in the context of a political world concerned about the cost of pensions that is a very, very powerful reality to be deployed in favour of further changes to pension entitlements,’ he said.

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