Pensions could be taxed like Isas, George Osborne announced in his summer Budget.
The idea would mean savings were paid in from taxed income, receiving a top-up from the government, and then withdrawn tax free. The government is set to publish a green paper in order to seek feedback on the plan, and said it will take care not to pre-judge the answer.
The green paper has, on the whole, been welcomed by the industry. This year’s pensions reforms were announced in the 2014 Budget without any prior consultation, and keeping that in mind, there is some understandable hesitation within the pensions world.
“There could be another big shake-up of the pension industry ahead,” Alex Brown, senior wealth consultant at Mattioli Woods said. “This momentum of change could cause short-term confusion in the marketplace and possibly have a detrimental effect on savings behaviour.”
The paper is available at www.gov.uk/government/publications and is open to responses for a 12-week period until Wednesday 30 September. Both individuals and organisations can respond to the paper.
Alongside the green paper, it was announced the guidance service, Pension Wise, would be extended to those aged 50 and above, after previously being only available to those aged 55 and older.
Mr Osborne also said in order to pay for the reforms to IHT, and to control the cost of pensions tax relief in the short term, the government will introduce a taper to the annual allowance for those with adjusted annual incomes (including their own and employer’s pension contributions) over £150,000. For every £2 of adjusted income over £150,000, an individual’s allowance will be reduced by £1 down to a minimum of £10,000.
Andrew Pennie, marketing director at Intelligent Pensions, said, “Raiding pensions is the wrong approach. Pensions have been through so many changes, we need a period of consistency, instead of constantly chopping at the tax advantages.”
