We asked regular Retirement Planner columnists and other experts what one thing they would most like to see in the upcoming Budget …
“Stop meddling with the current pension system”
“I would like to see politicians announce that they will stop meddling with the current pension system. Rather fanciful, I am sure you are thinking – and, to be honest, you are probably right.
“Tax and pensions are vote-winners – we saw that with then-Chancellor George Osborne’s announcements on pension freedom and choice and I suspect that wont be the last change that isn’t consulted on before it is announced.
“We are hearing – again – there may be a move to a flat rate of pension tax relief – say 30% or 33%. I am not that I am in favour of this and believe that, if we create a single tax rate, it will become more complex for savers.
“It is also likely to drive wealthier people away from pensions and, if this happens, I would be concerned fees might increase to cover costs and there would be less and less innovation in terms of product design and technology enhancements. For those less well off, they may decide to stick to the ISA regime, where they can access their money –potentially creating even more of a long-term issue.
“If they do announce a flat rate, then to help the people who have saved long-term in their pensions, we should see an increase or complete removal of the Lifetime Allowance.”
“Scrap the Lifetime ISA and immediately save £2bn this parliament”
“Last month, it was reported pensioner incomes have for the first time overtaken those of working-age households. The report was used to increase the pressure on removing the triple lock, but that is only partly responsible for this rise in pensioner income. According to the Office for National Statistics, the most significant factor is the retirement savings pensioners have made themselves.
“It is this pension saving regime that now needs clear, long-term support in the Budget. Without it, future governments will not be able to reap the benefits of encouraging a nation to save and take responsibility for their own retirements.
“Over the past two decades, successive chancellors have repeatedly undermined and complicated the pension system. There must be a fear that this one will be no different – perhaps under the guise of ‘preparing Britain for Brexit’. This cannot be allowed to happen, however, and instead the Chancellor needs to consider:
* Removing the ineffective and irrational Lifetime Allowance;
* Reversing the decision to reduce the MPAA to £4,000;
* Making a long-term commitment to pension income tax relief; and
* Scrap the Lifetime ISA and immediately save £2bn this parliament.”
“Please let’s go back to a single Annual Allowance – whatever it may be”
“My hopes for the upcoming Budget are not much different from this time last year as all the things I feel that need to change either haven’t or have actually got worse over the last 12 months. It all revolves around the complexities of how much you can put into a pension.
“Pension simplification brought a roughly fair and simple approach across all types of schemes with the single annual allowance for all – albeit the calculations differ for different types of scheme. We knew where we stood. Well, mostly.
“The introduction of the Money Purchase Annual Allowance (MPAA) and the Tapered Annual Allowance (TAA) have left people with massive planning issues since, before you can work out what you can contribute, you need to know what you are earning, what you have done already and – stupidly, in the case of the TAA – what you have or are going to contribute/accrue in the tax year.
“Advisers are pulling their hair out with calculations to try and avoid tax charges, many of which I am asked to check and with some calculations being more akin to an accountant’s job than a pension specialist’s, I fear for those without an adviser at all.
“Please Mr Chancellor … let’s just go back to a single Annual Allowance – whatever it may be.”
“Abolish the Lifetime Allowance”
“It is hard not to reach the conclusion current pension tax policy is the result of muddled thinking – after all, how can we have a system that squeezes from both sides the ability of individuals to save for a secure retirement?
“This is the consequence of last year’s cut in the Lifetime Allowance and an Annual Allowance that, for some, will be further reduced by the tapering rules, resulting in a tax system that limits pension contributions and penalises success in achieving a decent-sized pension fund. The truth is that we may need one or the other, but not both.
“Go back to pension simplification and we had annual allowances that peaked at £255,000 and a Lifetime Allowance of £1.8m. Now, we have an annual allowance of £40,000 – possibly lower, due to tapering or the MPAA – and a Lifetime Allowance of £1m.
“Why do we need to penalise people who build a pension pot that might only provide the average wage? In our view, it would be fairer to abolish the Lifetime Allowance, or at least to reduce the rate of tax that applies to excess benefits.”
“A real incentive to encourage advice take-up”
“In these times of big decisions surrounding Brexit, I would like the Budget to reveal one more big decision – to help support the long-term success of pension freedom. This wouldn’t be a change of rules or regulation, however – we have definitely had enough of those.
“What I would really like to see is the government providing retirees with vouchers to pay for regulated financial advice – a real incentive to encourage advice take-up and give more people a better chance of achieving a good retirement outcome.
“I know I am clutching at straws here but, if we look at the mistakes people are making with their pensions, the scams catching vulnerable people out and the excessive amounts that have been and are planned to be spent on delivering yet more pension guidance, then perhaps my case becomes stronger.
“If defined benefit scheme members with more than £30,000 of benefits are required to take specialist advice, why are defined contribution members not afforded similar protection? Guidance is not advice and is still exposing too many to risks and poor decisions. The use of regulated advice will be the key factor in pension freedom success – so here’s wishing a brave Chancellor is prepared to make that happen.”
“Any changes should be given appropriate lead-time to allow the chance to plan”
“With the Chancellor’s focus on the commencement of Brexit for real, I’m hopeful we will not see any major changes to the current pension regime. In fact, if anything, I’d like to see a reversal of the proposed reduction in the Money Purchase Annual Allowance.
“This proposal seems to be trying to solve a problem that doesn’t exist to any large degree, saving the Treasury a relatively paltry sum while introducing yet another complication to those looking to enjoy the new pension freedoms.
“If we do have any announcements, we must simply hope they are delivered in a factual and concise way and not in the manner of previous chancellors who seem to crave headline-grabbing half-truths, without the necessary detail to allow delivery. Communication is about the management of expectations and too often headline policies have been promised, but not delivered.
“Changes require preparation, education and implementation and, as such, any announced changes should be given an appropriate lead-in time to allow the industry and savers the appropriate chance to plan.”
Retirement Planner‘s sister title Professional Adviser has again teamed up with Cofunds, the UK’s largest platform, and experts from Technical Connection for a special ‘morning after’ webinar to discuss whatever changes the 8 March Budget may bring and how they could affect advisers and their clients. You can register here now and then tune in on Thursday 9 March at 11am.