Stewart Hastie, ACA Chair, outlining the ACA’s submission says: “The tax treatment of UK occupational pensions schemes is based primarily on the premise of aligning taxation with the deferral of pay and income to encourage and incentivise long-term saving for retirement. Tax is deferred during the accumulation of pensions savings – both contributions and growth – and instead is levied during decumulation.
“Despite the success of the UK occupational pensions system, there remain significant challenges in the level of adequate savings being built up by current and future workers as highlighted by the DWP’s own research in 2023[1]. Whilst we recognise the reality that Chancellors may want to review and potentially adjust pensions taxation from time to time, this needs to be undertaken carefully and in full knowledge of the potential consequences for savers (and pensioners), pension schemes and employers given wider policy aims such as improving retirement outcomes and encouraging economic growth.
“Changes that bring forward tax revenues will likely exacerbate the adequacy challenges for current and future workers, and for current pensioners. Confidence in the future tax treatment is essential if adequate provision is to be made.”
As a result, the ACA submission says the government should seek to identify an overall framework which can flex to accommodate the needs of the day and on which the political parties might agree a consensus. Any revised or updated tax regime should cater for all savers - defined benefit (DB), defined contribution (DC) and collective defined contribution (CDC) - and seek to minimise any disincentive for long-term savings.
Changes should also not lead to any groups being discouraged from continuing in employment due to inflexible rules (as has occurred for example in the medical profession). In the ACA’s experience, careful consultation and a reasonable timeframe are crucial to successful implementation of any changes.
In the Appendix to their submission, ACA sets out, at a high level, what are some of the key considerations when considering potential changes to pensions taxation. Comments are based on technical knowledge and experience in what is a very complex area.
ACA says it would be happy to discuss pensions taxation further and provide technical input into how potential or planned changes might impact occupational pension schemes at a financial or operational level including implementation considerations for any changes.
ACA Pre-Budget Submission
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