Pensions - Articles - Autumn Budget bucket list for pensions and savings

 Now’s the time for targeted interventions, not tax tinkering or radical reform of pension tax relief

 • Complex pension tax relief reform would be highly challenging to implement amongst many other pension priorities
 • An increase to Money Purchase Annual Allowance would benefit over 55s caught unawares by pandemic
 • Solution to ‘net pay’ anomaly well overdue to ‘level up’ pensions tax relief for low earners
 • Opportunity to drop or amend controversial proposals around implementing increased Normal Minimum Pension Age

 “In his Spring Budget, the Chancellor froze the lifetime allowance, the maximum an individual can save in their pension on a tax favoured basis. Over the 5-year freeze, growing numbers of medium earners as well as higher paid will hit the maximum they can save in a pension with tax breaks. This reduces the justification for making other cuts in incentives for higher rate taxpayers.

 “Currently, the Government is pushing those running defined contribution pension schemes to make significant changes to where they are investing members’ funds to address climate change and to invest more in infrastructure and start-up companies to turbo-charge the economy. Reducing tax incentives for many pension savers risks sending out mixed messages.

 “The Treasury has been seeking to ‘protect’ a small minority of individuals who are in schemes whose rules by sheer accident of history give an ‘unqualified right’ to take benefits at age 55. While well meaning, these protections would create horrendous complexity and multiple unintended consequences for little real benefit. The pensions industry is united in calling for a radical rethink to keep things simpler and fairer across the board, while helping pension savers understand their entitlements so they can plan for their future.”

 “In his Spring Budget, the Chancellor froze till April 2026 the thresholds at which individuals start paying basic rate and higher rate income tax, rather than increasing with inflation. This means as individuals’ earnings increase, they’ll pay income tax on a larger proportion of these earnings and more will cross into paying higher rate income tax, leading overall to a higher income tax burden.
 “On top of this, the social care funding deal means individuals alongside employers will pay an extra 1.25% in National Insurance from April 2022, becoming a separate ‘levy’ a year later.

 “While Government finances look challenging for the years to come, and with the prospect of a winter of sharply rising prices, we’d hope the Chancellor will avoid a third round of income tax or NI hikes in the October Budget.”