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Mattioli Woods calls to scrap tapered annual allowance

Mattioli Woods calls to scrap tapered annual allowance

Mattioli Woods has joined calls for chancellor Philip Hammond to get rid of the tapered annual pension allowance, as it would make "a lovely Christmas present".

Looking back over 2016, Karena Woodall, consultant at the firm, said she believed the tapered annual allowance would not last the year.

Ms Woodall noted the March Budget yielded little excitement for the pensions world, despite much anticipation of change.

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She said: "April brought a new state pension, one easier to understand. Everyone would get £155 a week – provided they had enough qualifying years and no contracting out history.

"April also saw the end of a stalwart of our industry, the demise of contracting out. Active defined benefit schemes were hopefully prepared for the change and the potential funding impact it would have."

She also noted The Pensions Regulator's deterrent activity across 2016.

"Also in April an old superhero reinvented itself, with the regulator flexing its muscles. ‘How-to’ guides were produced for trustees to support the new defined contribution code, and Swindon Town became the poster company for how not to avoid your auto-enrolment duties." 

The football club received fines of £22,900 from The Pensions Regulator after it failed to put eligible workers into a pension scheme or comply with other workplace pension duties.  

She said: "With Swindon Town, the regulator sent a clear message that deliberate non-compliance would not be tolerated, and this was not an empty threat. In October 2016, the regulator’s quarterly compliance and enforcement bulletin showed it was not afraid to caution employers, and then fine those who failed to heed their warnings."

Ms Woodall noted Brexit came and former pensions minister Baroness Ros Altmann exited, to be replaced by a non-ministerial role for pensions, as for the first time in six years, we had a non-pensions minister looking after the pensions frontier.

"The lifetime allowance became a shadow of its former self, reducing to £1m from April 2016. HMRC embraced the paperless revolution and, in July 2016, new online applications for pension protection came into force."

Ms Woodall added pension freedoms continued to gain popularity, however concerns over exit charges resulted in consultation from both the Financial Conduct Authority and Department for Work & Pensions on capping these costs.

"Salary sacrifice, often cited as being a target for change, was given the once-over and alterations confirmed in the Autumn Statement can only be the start of future tweaks to this popular strategy."

"While the government has indicated that only three per cent of individuals aged 55 and over make defined contribution contributions of more than £4,000, it was still a shock that the money purchase annual allowance was slashed in the Autumn Statement."

She added of concern are those pension savers in that group who may have elected to reduce hours and are taking pension income to supplement retirement income, believing that they still had scope to contribute into their retirement years and many will have planned with the £10,000 money purchase annual allowance in mind.