28th October 2015
George Osborne has signalled that changes to pensions tax relief for high earners will not be finalised until next year, providing a window of opportunity for those who may be affected to boost their pension pots.
Responding to a question from Tory MP Richard Graham yesterday, the Chancellor indicated that the Treasury will produce the government’s final response to its pension tax consultation in next year’s budget.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, says: “The government’s decision not to respond to its consultation until next year is a reflection of the complexity of the pension tax system and the challenge in introducing any reforms. We welcome the fact that they are taking a measured approach rather than rushing at the problem.”
“This is a mixed blessing for higher earners. A quick response would have meant no change. The fact that they want more time to work on it suggests they are still pursuing fundamental reforms; I believe these are likely to lead to cuts in the tax breaks offered to higher earners. A word to the wise: seize this opportunity to maximise your pension funding while you can still benefit from these tax breaks, they probably won’t be around for much longer.”
“Over the next 6 months we’re likely to see a rush of higher earners looking to make the most of the current system while they still can.”
Old Mutual Wealth pensions technical expert Jon Greer adds:”This is a signal of intent from Government that indicates they are seriously considering a major overhaul of pension tax relief.
“The Green Paper has been positioned as an open consultation, but today’s confirmation that it will form part of Budget 2016 suggests that we can expect significant reform next year.
“For some time there has been a growing sense that the Treasury no longer support the current pension tax relief system and that now seems almost certain.
“Precisely what system we end up with remains to be seen but it is crucial we have an approach to pension tax relief which is simple for the public to understand and sustainable from a public finance perspective.”