In this week’s Enews, we look at the CIOT’s call for the government to take a strategic approach to tax policy. There is also news on the Pension Schemes Bill and the cost of retirement to update you on.

• Government should take more strategic approach to tax policy, says CIOT
• Government introduces Pension Schemes Bill
• Cost of minimum retirement lifestyle has fallen amid lower energy prices

The government should take a more strategic approach to tax policy, consulting earlier and giving greater thought to the design of the tax system, says Nichola Ross Martin, President of the Chartered Institute of Taxation (CIOT).

In her inaugural speech as CIOT President, Ross Martin said that making a success of MTD will need HMRC and tax professionals to continue to work closely together.

She also promised to continue to press for improvements to HMRC service levels over the year ahead.

The CIOT President also encouraged the government to consider introducing a statutory employment test

In addition, she urged Institute members and employers to feed into a review of the Chartered Tax Adviser (CTA) qualification.

Ms Ross Martin said:

‘While there is plenty of argument about rates and burdens in parliament, there is very little about reform and design.

‘Take employment taxes. The PAYE system is the government’s main breadwinner. Successive governments have tweaked the rates and thresholds for national insurance but paid rather less attention to the fundamental issues as to how tax policy might adapt to cope with the changing world of work.

To pose these questions is not to argue for an ‘everything everywhere all at once’ approach to tax. But it is to point out that there is more to tax policy than rates and thresholds. Strategy is crucial.’

Internet link: CIOT website

The government has introduced the Pension Schemes Bill, which it says will make pensions easier to understand and manage as well as drive better value over the long term.

The bill will work to ensure savers get good returns and drive economic investment by requiring defined contribution (DC) schemes to prove they are value for money to avoid underperforming schemes.

It also aims to simplify retirement choices by all pension schemes offering default routes to a retirement income and consolidate and professionalise the Local Government Pension Scheme (LGPS).

In addition, it will bring together small pension pots worth £1,000 or less into one scheme certified as delivering good value and create new rules for multi-employer DC scheme ‘megafunds’ of at least £25 billion.

This is so that bigger pension schemes can drive down costs and invest in a wider range of assets and increase flexibility for defined benefit (DB) pension schemes to safely release surplus worth £160 billion, the government said.

Liz Kendall, Work and Pensions Secretary, said:

‘Hardworking people across the UK deserve their pensions to work as hard for them as they have worked to save, and our reforms will deliver a huge boost to future generations of pensioners.

‘The bill is about securing better value for savers’ pensions and driving long-term investment in British businesses to boost economic growth in our country.’

Internet link: GOV.UK

The minimum amount someone needs in retirement has fallen, amid lower energy prices and people’s changing expectations, according to a report from the Pensions and Lifetime Savings Association (PLSA).

This year, the cost of a minimum retirement living standard for a one-person household has decreased by £1,000 per year to £13,400, says the PLSA. For a two-person household, it is £21,600, down from £22,400 a year previously.

For a moderate lifestyle, a single person would need £31,700, up by £400 from £31,300 previously, while two people would need £43,900, up by £800 from £43,100 previously.

For a comfortable retirement, a single person would need £43,900, up by £800 from £43,100 previously, and a two-person household would need £60,600 – a £1,600 annual increase from £59,000.

Zoe Alexander, Director of Policy and Advocacy at the PLSA, said:

‘Everyone’s situation is different, and contributions should be manageable. But if your circumstances improve, even small increases can make a big difference to your future.

‘This year’s findings show that costs can go down as well as up. But planning matters more than ever. Whether you're on your own or sharing your future with someone else, these standards are here to help savers picture and plan their retirement – with real figures, real choices and real flexibility.’

Internet link: PLSA website