If the chancellor is to scrap pensions tax relief within the decade, then he will do it this March in the Budget.
This was the warning shot across the bows at the True Potential Outlook and Opportunities Forum in Manchester, by Michael Johnson, independent research fellow at the Centre for Policy Studies.
He told 800 delegates that although there had been “lots of speculation in the past and nobody knew what would happen”, the chancellor still needed to balance the budget by 2020 and diminish the deficit.
“To do this he will need to look at tax relief and the low-hanging fruit is pensions tax relief. Let me be clear. I am talking about the end of pensions in the current tax framework”, with the industry moving to a single flat rate.
He continued: “The simplest thing the chancellor could do in March is axe national insurance contributions relief and change nothing else. But the current tax relief regime is expensive, incomparable, illogical, incomprehensible and ineffective.
“The chancellor should scrap it all, including NICs. Tax relief is not an incentive to save, it is a personal tax planning tool.”
Mr Johnson admitted that he had recommending ditching the whole framework for some time, but that if it is actually going to happen within the next decade, it will be in March this year.
His comments contradicted research by Aviva late last year, which suggested that people did appreciate the tax-free upfront contributions into pensions.
The lifetime allowance was also deemed “a licence to print money for consultants” by Mr Johnson, who called for it to be scrapped.
“Economically, it is not that expensive to scrap the LTA. It does save £1.1bn a year for the Treasury, but in the long scheme of things, this is not a lot.”
Instead, the UK should adopt a cradle-to-grave savings product, a lifetime savings Isa, which would have some government input, along with protections built in around a workplace Isa.
He then showed how this would work after retirement age, with it converting to something that is “pensions-like”. He called this framework the ‘Isa Warehouse’.
However, not all advisers were convinced by this wholesale change to the pensions system. One adviser, speaking after the conference said: “I am a pensions adviser. I have been helping people with pension planning for nearly 30 years. What Michael Johnson was claiming will not work for most of my clients - and it would put advisers out of business.”
David Trenner, technical director for Intelligent Pensions, added: “The CPS has been trying to destroy pensions since 1985.”
Last year, pensions minister Baroness Altmann criticised the idea of pensions and Isas being interchangeable. At the time, the Conservative peer said it would be important to retain the distinction to ensure savings were kept for retirement.