The Association of British Insurers (ABI) has today supported calls for the Government to scrap the money purchase annual allowance (MPAA).
AJ Bell agrees and first called for the MPAA to be abandoned in March last year.
Tom Selby, senior analyst at AJ Bell, comments:
“Even before the pandemic struck, slashing someone’s pensions annual allowance by 90% - from £40,000 to just £4,000 – merely for accessing £1 of taxable income from their retirement pot felt grossly unfair.
“But during a period of national lockdown, when millions of families are already facing severe income pressure as unemployment rises, it feels particularly unjust.
“Savers withdrew £9.4 billion flexibly from their pensions in 2020, while hundreds of thousands will have accessed their retirement fund for the first time during the year.
“Within those numbers there will inevitably be people who have been forced to dip into their pension as a result of Coronavirus. This behaviour could range from someone replacing lost salary from employment to helping a younger relative pay their bills or older relative cover care costs.
“Regardless of the circumstances, the MPAA is applied indiscriminately and permanently, leaving people facing an uphill battle to rebuild their retirements.
“This wrongheaded policy, which also runs counter to increasingly flexible working patterns, must now be rethought as a matter of urgency. If this review needs time, in the interim the Chancellor should increase the MPAA to £10,000 – the level it was originally introduced at in 2015 – to give savers a little more flexibility.”