The removal of the tapered annual allowance, an increase to the lifetime allowance, and an entire systems review – here’s what the experts from the pensions world would like to see in the 2018 Budget
This autumn’s Budget will take place on Monday 29 October – just two days before the nation’s spookiest holiday.
Few leaks have trickled out from Westminster so far, but it cannot be long before the FT gets wind of some of the upcoming announcements. It has been suggested, however, that chancellor Philip Hammond is set to reveal a cut to pensions tax relief in order to raise revenue to pay for the NHS funding commitments.
In August, meanwhile, rumours of flat-rate tax relief surfaced again, some two years since gossip about the long-feared change on pension contributions hit its peak.
Rumours aside, we will not learn the contents of Hammond’s red box until Monday afternoon. With that in mind, Retirement Planner has asked some pensions boffins what they hope to see from next week’s main event.
‘The removal of pension complications’
Intelligent Pensions technical director Fiona Tait
“I would like to see a return to the ideals of pension simplification and the removal of all the pension complications that have been introduced since 2006. Top of this list are the annual allowance taper, which is convoluted and impossible to accurately calculate until an individual’s exact income has been ascertained, and the money purchase annual allowance (MPAA), which discourages further saving at a time when people are most likely to appreciate the need for it.”
Tait also says she would like the see the lifetime allowance (LTA) abolished, and long-term care provisions, as well as pensions that provide for the family as a whole, considered under a longer term strategy.
‘Full and formal review of pensions’
Dentons Pension Management director of technical services Martin Tilley
“My one wish from the Budget would be for the Chancellor to state that a full and formal review of the pension systems will be undertaken after Brexit has been firmly put to bed. This would include a review of the long-debated pensions tax relief system and the numerous limitations on contributions such as the annual allowance and lifetime allowance.
“All the while we have this political, time-absorbing issue, any change is likely to be more of the short-term tinkering around the edges we have seen in nine of the last 11 budgets, which might purport to balance a cost but, in reality, simply disillusions potential savers and prevents trust in the current system.”
‘Meddling is a real concern’
DP Pensions director Elaine Turtle
“Rumours abound that chancellor Philip Hammond will make changes to the taxation of pensions to fund the NHS or other deficits on his spreadsheet in his 2018 Budget speech. This may turn out to be just speculation but it is a real concern as the constant meddling just compounds the distrust consumers have for the pensions system in the UK.”
Turtle adds that the removal of the LTA, as well as the “overly complicated” tapered annual allowance, would make for a popular Budget speech for the pensions industry and savers alike.
‘Policies designed for the long term’
Curtis Banks pensions technical manager Jessica List
“If there are major change, such as overhauling the current tax relief system or scrapping the LTA, my overarching wish is for these changes to have been fully thought-out and designed with the long-term pension savings environment in mind.
“Changes to pensions, which only consider short-term issues and run the risk of being altered again with a new government, don’t benefit anyone: they just create complexity and make pensions seem more opaque and less attractive to savers.”
‘A return to the single annual allowance’
Technical Connection head of pensions Claire Trott
“I would love a long term, well planned strategy for sorting out the issues with the annual allowance. We currently have at least three levels of the annual allowance we have to deal with, and one of those is also variable depending on factors often out of the member’s control.
“We have the MPAA, the tapered annual allowance and the standard annual allowance, which makes it very confusing for members. We also constantly live in fear that pensions tax relief will take another hit by the reduction of one or all of these allowances.
“I would like to return to a single annual allowance that is not dependent on non-pension factors such as income so that pension scheme members can plan their contributions rather than having to wait until the end of the tax year and still try and make educated guesses.”
Lastly, Trott says she would like reassurance the allowance will remain stable or even increase over time.