Pensions - Articles - Comment on the decision to scrap lowering the MPAA

 “This is good news. A MPAA of £4000 was too low and would have acted as a disincentive to flexible working just at a time when we should be supporting it given savings shortfalls. We need to change the way we think about ‘retirement’ so we can better support flexible working, rather than impede it.

 “It also went against the philosophy of pension freedoms for a cost saving of just £70m.

 ‘Retirement’ is no longer a cliff-edge event. It’s a process over many years. As we see a shift of more people retiring with DC than DB pensions more will be unable to retire early. But for some, working full time into later years will be a struggle – either for health reasons or because they have care responsibilities. The government should be doing all it can to support that.”

 Giving an example of how someone would have been affected, Chris Noon added: “If we take a 57 year old earning £50,000 per annum full time had already taken advantage of the 25% tax free lump sum. They then decided to reduce their hours to a 3 day week bringing their earnings down to £30,000 and they decide to withdraw money from their pension to supplement their income. If we assumed they have total contributions of 15% into their pension (a combination of theirs and their employer’s contribution) that equates to £4,500. People therefore would have either been deterred from withdrawing from their pension or would have stopped saving into it. This is antithetical to the philosophy of pension freedoms, as well as unsupportive of flexible working.”