An autumn reprieve on pensions?
1st November 2015
This month’s Autumn Statement will not reveal any major pension tax reforms
Parliamentary questions are sometimes no such thing. Instead, they are mechanisms by which the government can reveal a decision on which it would prefer not to make a formal announcement. A good example (see below) occurred in late October in an exchange between Richard Graham, the Conservative MP for Gloucester, and the Chancellor.
Hansard 27 October 2015
"Richard Graham (Gloucester) (Con): The coalition government freed pensioners from mandatory annuities and encouraged saving through ISAs and auto-enrolment. However, tax relief on contributions to pensions is expensive and favours higher-rate taxpayers much more than others. Does my right hon. Friend agree that that is an area in which sensible reform could be considered, in order to help to balance the budget without disincentivising saving?
Mr Osborne: My hon. Friend is right to say that we have taken significant steps to encourage saving, not least by giving pensioners control over their pension pots in retirement and by trusting those who have saved all their lives with the money that they have earned and put aside. He is an expert in these matters, and he will know that we are open to consultation on the pensions taxation system at the moment. It is a completely open consultation and a genuine Green Paper, and we are receiving a lot of interesting suggestions on potential reform. We will respond to that consultation fully in the Budget.”
What the Chancellor subtly stated here is that there will be no announcement on the outcome of July’s pension tax reform consultation until the next Budget proper, in March 2016. The delay can be read in a variety of ways. Either Mr Osborne needs extra time to refine another major overhaul, or the grand idea of an ISA pension is heading for the long grass after meeting more resistance and implementation problems than anticipated.
Alas, the statement does not guarantee there will be no changes to pension tax in the Autumn Statement. There have already been suggestions that one way the Chancellor could provide some funds to help out with his tax credit problems is to cut pension tax relief again. So what looked like a fresh period of grace to undertake some pension planning may not be so…
The value of your investment can go down as well as up and you may not get back the full amount you invested. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.