The pandemic’s current pressure on finances will have only brought this predicament into sharp focus. Surely now is the time to review this rule when pension flexibility has never been so important.
Any financial downside for the Treasury would not be severe. As A-day fast recedes into the past, the ratio of pre-A-day benefits to post-A-day benefits has shrunk, meaning the protected part is a much smaller part of someone’s overall pot. Plus, those 20-year-old footballers in 2006 are now nearing their 35-year-old retirement age; soon there will not be many people out there with a protected retirement age.
The fast-approaching Budget will probably not include any big pension tax announcements – these may be saved for a future day.
But there is still the opportunity to tidy up some straggling ends. Letting everyone keep their entitlement to higher tax-free cash or a lower pension age seems a good place to start.
Rachel Vahey is senior technical consultant at AJ Bell