There was little to commend the Budget to the House as far as pensions were concerned, which has commended it to advisers who are already busy dealing with successive Budget changes.
In advance of the chancellor standing up on 22 November, market pundits had predicted further tax changes, particularly in the realm of pensions, as well as changes to help boost social care, protect workers in the so-called gig economy and lay some solid foundations for preventing pensions fraud.
But the lack of pensions announcements by chancellor Philip Hammond meant a Budget which had been widely anticipated as the 'big reformer' of pensions tax relief turned out to be a no-show.
Indeed, as Jon Greer, head of retirement policy at Old Mutual Wealth, has commented, this was a “dull and boring Budget on pensions”.
Pension tax relief
The fact there was no tinkering with tax relief was a reason for a collective prayer of thankfulness among the pensions industry.
There had been speculation tax relief on pensions would be reduced by restricting tax relief to the basic rate of income tax, or perhaps a middle ground between the higher rate and basic rate.
Steven Cameron, pensions director at Aegon, says: “The lack of any mention of pension tax relief is very unusual for Budgets but very welcome. Implementing any change would have been hugely complex and required legislation in a parliament dominated by Brexit.
“Pension tax relief does reduce the chancellor’s tax take in the short term, and there’s a case for redistributing this to those most in need. But this should be done only once there has been time for proper debate and not rushed through as a government cost cutting measure.”
For some, this was a “missed opportunity” to help make pensions less complicated. Phil Brown, head of policy for LV, comments: “It is a shame the chancellor continues to shy away from introducing a flat rate of tax relief for pension savings or removing the lifetime allowance.
“Both of these reforms would make the pension system easier to understand and encourage more people to save.
“We hope these haven’t fallen off the agenda completely and the government will continue to consider them.”
Indeed, there were no more cuts to the highest end of pension savings, with the government stating it was committed to previous pledges to let the lifetime allowance (LTA) rise in line with CPI (although the higher RPI would have been more welcome).
When the LTA came in, as part of the 2006 A-Day changes to simplify pensions (how we laugh now), the LTA stood at £1.5m, rising to £1.75m in 2009-2010. It was slashed in previous Budgets to £1m in the 2016/2017 tax year.
Had the original £1.5m LTA been linked to the RPI from the start in 2006, it would have doubled in value by 2016, according to calculations by Chartwell Financial Services. The excellent LTA graph created by Chartwell, seen below, details this succinctly.