Lane Clark & Peacock partner and ex-pensions minister Steve Webb has called on the Treasury to relax rules which could act as a barrier to people aiming to rebuild their pension pots when the Covid-19 crisis is over.
Webb noted two groups whose pensions may be most affected by the current situation including those aged over 55 who access their pension pots for emergency cash to tide them over and those whose investments have fallen substantially in value in recent weeks as markets have tumbled, especially those who are already drawing on some of their pension.
He said if these groups have taken taxable cash from a ‘pot of money’ or defined contribution pension then “they are likely to be hit by a strict limit on future pension contributions”. Webb is calling for the £4,000 tax relief limit under the rules of the money purchase annual allowance to be lifted, at least to £10,000.
“Many people will have seen the value of their pension savings tumble in recent weeks, and others may feel that they have no choice but to access their pension savings to tide them over short-term financial pressures. In both cases, pension savings could be severely dented. Once the present crisis is over some people will be in a position to start building up their pension again, especially if they are still in work.
“The government must support people in this rather than put barriers in place. The current £4,000 limit is far too low. If it cannot be abolished altogether it should at the very least be raised to the £10,000 figure from a few years ago.”
He added: “Rebuilding pension savings is going to be a challenge for many, so the government needs to show it is on people’s side, not standing in their way.”