As the Budget approaches and the government’s plans are leaking in the media, we cannot help but ponder how far reaching this will be for pensions. The reduction in pension tax relief, reported in the Daily Telegraph last month, has the potential to be both positive and negative.

If communicated carefully, it could somewhat counterbalance millennials’ predisposition to live in the moment and encourage them to engage more with pension savings. Meanwhile, the introduction of any age-related threshold to the tax relief could throw some in the older demographics outside its scope, leading to a form of ‘differed disengagement’ among this section of society.

Another item that has been on the Chancellor’s agenda for some time is the reduction in the money purchase annual allowance. Given the industry’s negative feedback, it would be disappointing to see this implemented.
While it is understandable for the Treasury to want to close the pension recycling loophole, this policy would be an excessive way of addressing it.

It would equate to giving people freedom and choice and restrict it at the same time by making it very hard for them to make that choice. It is counterproductive at its best and distrusting at its worst. In recent years, there has been a tendency for pension tax measures to focus on addressing short-term Treasury objectives, rather than the longer-term benefit to society.

We hope that in this Budget, the Chancellor will look beyond the end of the current parliament, particularly as it may not last as long as it could.

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