Policy on-the-hoof

Jeff Prestridge

Jeff Prestridge

Yet I doubt that Mr Webb’s plea will be heeded. For a start, we already have two pension changes in train that will impact adversely on many savers once the new tax year starts.

The first is the impending reduction in the lifetime allowance from £1.25m to £1m. This will expose many savers’ pension funds to the threat of a 55 per cent tax.

As I said at the FT Adviser forum last week in London, this reduction is a spiteful move because it penalises pension success.

By all means, restrict savers’ ability to build their pensions through control of the annual allowance, but savers should then be left to enjoy the fruits of the fund they amass without worrying about the taxman coming round to take a slice of the action.

The second is a curtailment of the ability of additional rate taxpayers to fund their pensions through a restriction in their annual allowance. In some cases, the allowance will fall to £10,000, dependent upon earnings.

Once these two changes have been introduced, and June 23 is out of the way, I am sure Mr Osborne will then return to the pensions drawing board – way before the current parliament draws to an end. After all, he has the Government’s finances to repair.

Personally, I think it is time for pensions policy in this country to be depoliticised. We have had far too much meddling with pensions. This goes back to 1997 and Gordon Brown’s £5bn-a-year tax raid, a raid which hastened the demise of final salary pension schemes (in the private sector, not the public).

It has been continued by subsequent chancellors with a series of assaults on the lifetime savings allowance and other restrictions.

Governments, understandably, rarely think beyond the end of the current parliament. The result is on-the-hoof pension policy and changes which merely make a complicated system even more incomprehensible.

Surely, what would be best is for an independent pensions commission to be formed, whose role would be to decide upon the future pension framework in this country. Governments, current and future, would then be obliged to keep this framework in place.

If we went down this route, we could maybe create a pensions system devoid of complications and complexities – and that encouraged everyone to save for the future.

By removing the chopping and changing, we would also rebuild the country’s confidence in pensions as the main vehicle through which to fund retirement.