Brooks stated: “On 18th March, George Osborne will rise, 364 days after unleashing the biggest pensions revolution in a generation, to give his last Budget of this parliament, and possibly forever. The temptation must be there, with marginal seats looking even more marginal, to try and win the older voter round. So what might he say?”
1. The ability to sell annuities. This has been a major talking point within pension circles since Steve Webb mooted the idea. He would like to allow those already committed to an annuity contract to join the pension freedom party via a secondary market. This market would allow people to sell their annuity in return for a pension fund they could take in a more flexible way. Notwithstanding the risks to the individual, this must be tempting to Mr Osborne, and those who feel hard done by would be interested in the option of converting their contract into an alternative source of flexible income. I think it is highly likely that a consultation/white paper/feasibility study will be launched to look at this more closely.
Brooks commented: “While this may be attractive to existing annuitants, I have concerns about the effectiveness of such a market in giving good value to people. We would need to ensure the advice piece was more than just a conversation about taxation (à la Pension wise).”
2. Funding for a proper Pension Scam/Liberation task force (“Snooper Force/Scam Busters” for Thick of it fans). This would actually be a useful idea: for Mr Osborne to establish a body with the purpose of acting as a resource of support for trustees and allowing providers to investigate, and to name and shame, perpetrators when conducting their due diligence on pension schemes. It would also publicise how such parasites exist to feed off the general public’s confusion. The remit might extend to pension providers peddling dubious investment options.
Brooks added: “This would be a real statement of intent from the Government to demonstrate that, while they are introducing a raft of new freedoms, they care what people do with their hard-earned pension, and want to prevent them from being hood-winked into losing it via a dodgy investment or product.”
3. DB Flexibilities consultation. The Government has whispered about a consultation into allowing the flexibilities in DB schemes, and we would welcome something on this, especially in the area of transferring pensions in payment into a DC fund, extending the statutory right to a transfer to Normal Retirement Date (NRD) and reviewing the tax treatment of death benefits (to bring them into line with DC schemes). We would also be interested in the Government allowing DB schemes flexibilities such as larger lump sums or pensions in payment that can rise and fall over time.
Brooks said: “Allowing employers and people to consider restructuring their benefit promise, with the consent of the member, would be an excellent way of allaying the fears - of those concerned - about people going the whole hog, and transferring from the relative security of a DB scheme to the risky high seas of DC.”
4. Higher rate tax relief for pension contributions/Lifetime Allowance abolition. We would be surprised if this cropped up (but it isn’t impossible), although at the time of an election it may not be popular. The pill could be softened for a lucky few pension-rich people by the abolition of the Lifetime Allowance, which we would encourage.
Brooks stated: “I would rather the Government stopped tinkering with the way benefits are accumulated with the Annual Allowance already stripped back. Dis-incentivising people to save does not seem to fit with the ideology of Freedom and Choice, although I would dearly like to see the back of the Lifetime Allowance.”
5. The end of tax-free cash. This has been ever-present on these lists since time immemorial so it is here for that reason. Again, we would be surprised if, in an election year, the Chancellor decided to curb one of the biggest benefits in a pension scheme. It has been the lowest hanging fruit for many years, and perhaps its continued survival bodes well and, while it is the most tempting to change, it may be the forbidden fruit…
Brooks concluded: “This probably won’t happen, but one day it will, and that will be the day I get a prediction right! We wait with baited breath and, unlike previous Budgets, we now know that silence isn’t always golden and Mr Osborne may have one last sting in his tail.”
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