The Tax Incentivised Savings Association (TISA) is to add its weight to the growing campaign calling on the government to reconsider its proposed changes to the money purchase annual allowance (MPAA).
TISA’s policy strategy director Adrian Boulding (pictured) has revealed the trade association will be putting forward a number of alternative approaches for the Treasury’s consideration – including that, once an individual has accessed their pension flexibly, any further contributions would not attract the usual 25% tax-free cash.
Highlighting the rising trend of people working part-time across the UK labour market, Boulding pointed to Office for National Statistics figures showing the number of those doing so from the age of 70 onwards had almost doubled since 2006.
“This is now part of everyday behaviour for people of pensionable age,” he said. “Many will gradually reduce their working hours and top up their income with their pension, utilising the freedom options.”
According to Boulding, TISA is concerned the Treasury’s plan to cut the MPAA from £10,000 to £4,000, as outlined in last year’s Autumn Statement, “goes against the grain of encouraging people to ease into retirement by working longer on a part-time basis rather than face the traditional ‘cliff edge’ of giving up all work on a single retirement date”.
He added: “We have not found an easy answer to this conundrum but our key message is that the government should defer the proposed reduction in MPAA from April 2017 and instead work with the pensions industry to find a better solution that both meets the needs of those dovetailing work and retirement and protects the public purse against abuse.”
With the deadline for responses to the consultation on the MPAA reduction set for 15 February 2017, much of the reaction from the financial services sector so far has been negative.
Writing in Retirement Planner earlier this month, AJ Bell senior analyst Tom Selby said: “The Treasury expects the policy to save around £70m a year – small beer in government spending terms – but the cost to confidence in pensions is untold.
“Anyone who has already accessed their pension flexibly on the premise they could still save up to £10,000 a year tax-free will feel justifiably angry their annual allowance has now been slashed by 60%.
And Royal London director of policy Steve Webb said: “Cutting this allowance flies in the face of efforts to make retirement more flexible. We should be trying to make combining work and drawing a pension easier not harder.
“We also need to know what will happen for people who have already drawn taxable cash expecting to be able to go on saving £10,000 per year. Any retrospective change would be totally unfair to savers.”