- The Spring Statement was mercifully silent on pensions, with eyes now turning to a potentially painful Budget later this year
- Given the fiscal constraints facing Rachel Reeves, speculation about future tax rises and spending cuts has already begun
- Annual rumours that pensions tax incentives are facing the chop undermine trust in long-term saving and caused panic-induced decisions over tax-free cash ahead of last year’s Autumn Budget
- Rather than waiting for this to happen again, the chancellor should get on the front foot and commit to a ‘Pensions Tax Lock’ – a pledge not to change tax relief or tax-free cash, at least for the rest of this Parliament
Tom Selby, director of public policy at AJ Bell, comments:
“The Spring Statement mercifully avoided the usual pre-Budget speculation about the future of pensions tax-free cash and broader retirement savings incentives – namely pensions tax relief. However, the grim growth outlook, tight public finances and self-imposed constraints on raising income tax, VAT and National Insurance mean those rumours will no doubt surface once again ahead of the main fiscal event later this year.
“We saw before the Autumn Budget the impact this can have on people’s behaviour, causing a significant spike in savers making retirement decisions, such as accessing their tax-free cash, due to fears the chancellor’s axe could be wielded. Making long-term financial decisions based on fear is clearly not a good outcome and each time these rumours raise their ugly head, damage is done to people’s trust in pensions.
“Rather than waiting for that to happen, the chancellor should commit to a Pensions Tax Lock, ruling out changes to tax-free cash or tax relief for at least the rest of this Parliament. This would allow Reeves to say she is on the side of savers and retirees, providing millions of Brits with the stability they crave to plan for the long term. If the chancellor really wants to build a retail investing revolution in the UK, providing a bit of certainty over the pensions tax rules would be a good place to start.
“What’s more, assuming the government has no intention of fundamentally reforming pension tax relief or scrapping tax-free cash – reforms which would cause a huge furore across the public sector and result in higher tax bills for NHS staff – this commitment would demonstrate the government is on the side of diligent savers and retirees, without costing the Treasury a penny.”
