Pensions tax relief changes loom large: McClymont

Pensions tax relief changes loom large: McClymont

Changes to tax relief on pensions are inevitable, despite there having been no mention of them in the Autumn Statement, a former Labour shadow pensions minister has warned

Gregg McClymont, now head of retirement at Aberdeen Asset Management, suggested Treasury was in the process of laying the ground for a change next year.

He justified his prediction on the grounds that pension freedoms had "radically" shifted the contract between individuals and the state when it came to retirement savings.

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"Pensions are usually defined as a form of long-term saving which is tax incentivised in return for no access until retirement, at which point you buy a guaranteed income.

"In a stroke pension freedoms blew that up," he said.

He said that meant the issue of tax relief "looms large".

"If individuals are no longer compelled to leave those savings where they are until retirement and buy a guaranteed retirement stream, why should the state provide generous relief, since the state ... is then on the hook in the long run for the liability of individuals who run out of money?"

He said this was an "obvious" point, and the "cardinal fact" in determining pension tax relief.

Earlier this year Treasury, under then-chancellor George Osborne, launched a consultation paper on pension tax relief. The process was shelved following the surprise result of the EU election, and has not yet been taken up again.

Mr McClymont, who shadowed former pensions minister Steve Webb before both lost their seats in the 2915 general election, argued that a fundamental shift in pensions investment risk was underway - away from the state and businesses, and onto the individual.

He said there was no reason to think this would not continue, making changes to pension tax relief all the more likely.

However, he argued that individuals had not necessarily asked for this responsibility.