OpinionMar 29 2023

'Pensions tax tinkering needs political consensus'

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'Pensions tax tinkering needs political consensus'
Jeremy Hunt announced the scrapping of the lifetime allowance in the spring Budget. (TOLGA AKMEN/EPA-EFE/Shutterstock)

The March Budget’s showstopper – the abolition of the lifetime allowance – caught me, and everyone else, by surprise. In fact, the Budget this year was so without fireworks and so boring that I must admit I actually fell asleep as this seismic news was announced.

Yet, there is absolutely no point in tinkering with pension tax rules unless there is political consensus. It is hopeless making any sort of plan if the rules change every five minutes. It appears neither of the major parties made any attempt to seek cross-party consensus before this reform was announced.

That is wrong, wrong, wrong.

Pensions now seem to share the unfortunate lot of the NHS – weaponised as political attack vehicles. I don’t know who is to blame but it is wrong to seek a short-term party advantage at the nation’s expense.

While the merits of the new rules on the annual allowance and the LTA can certainly be debated, it is unwise to proceed with them if no consensus can be reached. It will make the pensions potpourri even more of a mess. For me at least, they are certainly an improvement if only all parties sign up to the reform for the long term.

There is absolutely no point in tinkering with pension tax rules unless there is political consensus.

Trouble is already brewing; indeed, Graham Crossley, a self-proclaimed NHS policy wonk, stated on Twitter on March 16: “We could see a widespread temptation to crystallise NHS pensions from October 2023, when the new scheme partial-retirement rules are implemented, to avoid the uncertainty and risk of future LTA re-introduction.”

I am inclined to tell the politicians "a plague on both your houses”, or as Churchill said: “jaw, jaw is better than war, war”.

Pensions is such a big subject and affects so many people that policy changes must be made by the widest section of society possible and not be subject to political dogma of the right or the left. And we must make use of all the talents in our country.

Not so long ago, when I asked pensions industry experts which party had the best pension policy, the surprising answer was the Scottish National Party.

I have yet to read their latest offerings (I only tend to research what I am paid to write on to earn a crust), but true or not, what a shame if Scotland were to break away from the UK and we were to lose all the huge talents of so many Scots who helped make the UK one of the greatest countries the world has ever seen after the Act of Union in 1707.

DC workplace pensions fail the ‘little people’

Only a tiny few can afford independent financial advice. For the rest, saving for a pension has become a lottery. As a dinosaur with more than 30 years in pensions journalism, I am only sad that private defined benefit pensions are on the way out while SERPS and S2P have long gone.

These were the only pensions with guarantees – so much better for cleaners and shop assistants who do not have a clue about DC pension roulette and will never be able to afford bespoke financial advice.

Without the help of advisers, used by a privileged few, it is often a complete lottery whether people in workplace pensions will end up with a good pension or a dud.