Mark Pemberthy, Head of DC and Wealth at Buck, comments on the government’s proposed changes to the tapered annual allowance, as outlined in the Spring Budget:
“The tapered annual allowance is probably the most complicated way the Treasury can achieve its aim of reducing pension tax relief for high earners. Increasing the threshold will relieve some of the pressures on the medical profession, however the ongoing complexity of the taper will continue to cause confusion and, as a result, could still leave individuals erring on the side of caution and choosing not to work.
“Reducing the Annual Allowance to £4,000 for higher earners will make pensions an irrelevance for this group. There is a risk that board rooms around the country will switch off from the need or desire to provide quality pensions for their employees, above the minimum amounts required by law.
“The Treasury could achieve the same financial outcomes by reducing the headline Annual Allowance from £40,000. Today’s Budget is a missed opportunity to bring some much-needed simplicity back to pensions.”
Steven Cameron, Pensions Director at Aegon comments on the reform of entrepreneurs relief highlighting the importance of diversified retirement savings
“For some planning to use the sale of their business to fund their retirement, the dramatic reduction in entrepreneurs relief will come as a harsh blow. While too late for those about to retire, for those at younger ages, the message is not to risk all your retirement plans in a vehicle which could suddenly lose its tax advantages. While the reliefs and allowances for pensions are reviewed from time to time, the main purpose of pensions is to provide retirement incomes and it would be very surprising to see any retrospective cuts in tax reliefs there.”
Clare Moffat, head of business development at Royal London, said:
“The Chancellor’s decision to raise the threshold at which the tapered annual allowance kicks in is welcome but the pension tax system remains overly complex. In reality the Chancellor has missed the ideal opportunity to massively simplify the system by removing the taper altogether.”
Steven Cameron, Pensions Director at Aegon comments on the Chancellor’s lack of commitment to social care. In a Budget packed full of “getting it done”, it’s deeply disappointing that we received only a vague indication, of how or when social care funding will be tackled. While social care policy will rightly be led by the Health Secretary, its funding will have huge financial implications which will require the support of the Chancellor.
“The Government needs to urgently set out a fair and sustainable system, ideally with cross party support, detailing what the Government will pay and what individuals will be asked to fund themselves, based on their housing and other wealth. Individuals then need incentivised to plan ahead.
“In our view a cap on what individuals are required to pay is essential here to avoid fear that ‘catastrophic’ care costs will wipe out their life savings and inheritance aspirations.
“With social care increasingly needed in later retirement, defined contribution pensions offer a ready-made funding solution.”
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