Pensions - Articles - Retrospective tax cuts for pensions tax relief planned

Royal London policy director Steve Webb has condemned today’s announced by Treasury Minister Mel Stride that the government plans to reintroduce Budget cuts to pensions tax relief with effect from April 2017.

 In the March Budget the Chancellor, Philip Hammond, confirmed that the Money Purchase Annual Allowance would be cut from £10,000 per year to £4,000 per year. However, when the General Election was called this measure was quickly dropped from the Finance Bill. As a result the MPAA remained at £10,000 where it still stands.

 However, in a written statement today, the Treasury says: “The Finance Bill introduced in March 2017 provided for a number of changes to tax legislation that were withdrawn from the Bill after the calling of the general election. The then-Financial Secretary to the Treasury confirmed at the point they were withdrawn that there was no policy change and that these provisions would be legislated for at the first opportunity in the new Parliament.

 The Government confirms that intention. It expects to introduce a Finance Bill as soon as possible after the summer recess containing the withdrawn provisions. Where policies have been announced as applying from the start of the 2017-18 tax year or other point before the introduction of the forthcoming Finance Bill, there is no change of policy and these dates of application will be retained. Those affected by the provisions should continue to assume that they will apply as originally announced”.

 Commenting, Steve Webb said: ‘It would be outrageous for Parliament to be debating in September and October what tax allowances will be from 6th April 2017. Cutting the MPAA is an unnecessary measure in the first place, but it is particularly unacceptable to do so with retrospective effect. How were savers meant to know in May who was going to win the Election? This is an arrogant announcement based on the assumption that the DUP will vote with the Government on tax measures and so any tax change can be got through the House of Commons. With tax measures not debated in the House of Lords, this gives the government a free hand on tax which is not good for proper scrutiny of detailed changes such as this. The MPAA cut, if it has to be implemented at all, should be delayed until April 2018’.

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