11th June 2014
The pensions minister Steve Webb has played down the threat to pensions tax free cash after fears were raised that the Government may need to put in place restrictions to stem a loss of revenue.
Speaking at the Lansons Future of Financial Services conference in London this week, Webb said there is an awareness that there could, in theory, be a loss or revenue as people to recycle money through their pension under the new rules. However Webb said while the Revenue were no doubt looking at the issue, he was not aware of any plans to change the system radically.
Webb said: “I have heard no indication of substantive reform. I have heard of nothing fundamental such as changing the tax free lump sum or changing the rate of tax relief.”
There has been some debate about the issue including on the pages of Mindful Money. Pensions journalist John Greenwood says that recycling pension money using what is known as salary sacrifice could see a big loss to the Exchequer.
Other commentators also believe that the Chancellor George Osborne could not risk making a very popular reform unpopular by restricting the freedoms having only just offered them in the latest budget with Hargreaves Lansdown’s pensions expert Laith Khalaf particularly sceptical.
Talking about the reform more generally, Webb added: “It is the only thing I can think of that the Government has done where I have had people come up to me to shake my hand. I think it is real game changer.”
He said that suggestions that people might take all their money in one go were unlikely to be borne out, because people would be aware of the tax implications.
“People ask me ‘Will everyone will blow the lot on high living and Italian sports cars?’ I, of course, say no. If you have £30,000 with a state pension of £7,500 and a tax allowance of £10,500, if you take your money at £3,000 over ten years, then you don’t pay any tax on it, rather than taking it all in one go and paying tax on it,” he said.