The Pensions and Lifetime Savings Association (PLSA) commends the Chancellor for favouring stability over change in his approach to pension tax in this Budget.
With over 10 million more people saving into the pension system as a result of automatic enrolment, aside from addressing significant anomalies in the system, stability is vital to instilling confidence and encouraging everyone to save for the future.
The PLSA welcomes the Government’s plans to call for evidence to address the anomaly that sees more nearly two million low earners missing out on tax relief on their pension contributions through no fault of their own. Of the affected population, over 75% are female.
The PLSA has long called for this review and has done a considerable amount of work to find a solution to this issue and looks forward to engaging with the consultation. The problem can be addressed via a modification to HMRC’s ‘p800 process.’
We also note the Government has substantially raised the threshold at which the annual allowance taper kicks in, for the public and private sector, to £200,000 from £110,000. This will help reduce the complexity of pensions for the vast majority of people affected.
Nigel Peaple, Director of Policy and Research, PLSA, said: “We are pleased the Government has opted for a sensible, no surprises Budget that can give people confidence to save. Small but vital changes to the rules regarding the annual allowance taper and the net pay anomaly remove complexity and confusion. On the latter, we strongly urge the Government to adopt the simple, HMRC-based solution, supported by the pensions sector.”
Pete Glancy, Head of Policy, Pensions & Investments at Scottish Widows: “There has been a missed opportunity in today’s Budget by not simplifying a tax system that’s crying out for less complexity. While increasing the limit at which tapering kicks in addresses some specific challenges being faced by some doctors, it does nothing for the majority of people saving for retirement who struggle to understand pension taxation.
“We’d like to see a single, simplified lifetime savings approach brought in that would recognise people’s need for tangible benefits throughout their lives – from getting on the property ladder to supporting them during times of financial hardship and securing their retirement.”
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