Fiona Morrison, President of the Institute and Faculty of Actuaries (IFoA), comments on the Government’s Budget announcement on 16 March.

On introducing a new Lifetime ISA for those under 40

“The IFoA welcome’s the Government’s focus on encouraging saving for retirement and in particular the focus on younger savers and the self employed.   However, questions remain on how the new Lifetime ISA will work in practice.  Today’s announcement raises some difficult questions that will need to be addressed and impacts on wider policy understood.  In particular:

  • How will the Lifetime ISA work alongside the existing pensions structures?
  • What impact will it have on Automatic Enrolment and opt-out levels, as this could lead to individuals missing out on employer contributions?
  • Could the Lifetime ISA be used to encourage saving to meet long term care needs?

“In the Lifetime ISA, there appears to be no incentive for people to continue saving into it after 50, an age when many have greater discretionary spending.  As people tend to underestimate how long they will live, this leaves a risk of people not saving enough to fund their retirement and running out of money, thereby leaving them to fall back on the State for support.”

On Claims Management Companies being regulated by the FCA

“A stronger regulatory regime for claims management companies (CMCs) operated by the FCA should be beneficial for consumers.  IFoA research on third party motor claims shows that there is a link between the location of the highest levels of third party injury claims in the UK and the greatest number of claims management companies.  Further regulation of the sector could help protect consumers from higher insurance premiums caused by the filing of unnecessary claims.”

On the 0.5% increase insurance premium tax

“This year’s 0.5% increase in the Insurance Premium Tax will not have as much impact on people’s pockets as the 2015 increase.  It is very welcome news that this tax increase will be used for flood defences.  With the UK continuing to experience wet winters, with five of the top six wettest years occurring since 2000, proper flood defences are increasingly vital to protect our communities at risk from flood.”

On infrastructure investment

“The IFoA welcomes the announcements of £60 million to support plans for a high speed rail link between Leeds and Manchester, and £80 million to support Crossrail 2 in London. 

“The World Bank estimates that there is a need for $3.7tn of global infrastructure investment annually, whereas actual investment levels are only $2.7tn.  In the UK, a similar investment gap exists.  Addressing this infrastructure gap is critical to drive the UK’s growth and competitiveness.  However Government is not able to foot the entire bill.  Innovative models of public-private financing can and should be developed to attract potential investors in infrastructure projects.”

ENDS

Editorial notes:

About the Institute and Faculty of Actuaries

The Institute and Faculty of Actuaries (IFoA) is a royal chartered, not-for-profit, professional body.

Research undertaken by the IFoA is not commercial.  As a learned society, research helps us to fulfil our royal charter requirements to further actuarial science and serve the public interest. 

Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.

Members of the IFoA have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyd’s.

Members are governed by the Institute and Faculty of Actuaries. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of actuaries in society.

The IFoA is available to provide independent expert comment to the media on a range of actuarial- related issues, including enterprise risk management, finance and investment, general insurance, health and care, life assurance, mortality, and pensions.

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