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    A nail in the coffin for pensions?

    By Monica Cope on Thursday, July 30, 2015

    Just as ‘freedom and choice’ legislation introduced by the Budget 2014 was starting to make pension saving popular again, the Summer Budget 2015 reveals tax cuts which may deter pension saving.

    George Osborne yesterday announced that workers earning in excess of £150,000 per annum would face curbs to their annual pension allowance, which will gradually be reduced from £40,000 to £10,000 for earners up to £210,000.  This is a controversial move, which may well result in the disengagement of those influential high-earners.   The tax relief cuts will be used to fund an increase to the inheritance tax threshold, which will enable parents and grandparents to pass on assets worth up to £1m free of inheritance tax.

    Furthermore, the government has launched a consultation on pensions tax relief, effectively a root and branch review, with the aim of providing a more simplistic, sustainable and transparent pensions tax system.  The green paper hints at a fundamental reform from the current Exempt-Exempt-Taxed (EET) structure to a potential Taxed-Exempt-Exempt (TEE) system quite similar to ISAs, where you pay in from taxed income and payments out are tax-free.  The consultation provides a welcomed opportunity for industry experts to express their views on pensions taxation and will run for a 12 week period, ending 30th September 2015.

    Following the major changes implemented over recent years, the pensions industry has been crying out for a period of legislative and regulatory stability.  However the prospect of further change indicates additional administrative challenges for the industry and more confusion for scheme members trying to understand an already complex and highly technical pensions landscape.

    On that note, it’s worth highlighting that government have announced that Pension Wise, the free and impartial government service established to provide guidance on Defined Contribution (DC) pensions and ‘freedom and choice’, has been expanded to  include those over age 50.  Previously the service was only available to over 55s.

    Finally, it is reassuring news that the implementation of the second hand annuities market has been delayed until 2017.  This announcement may well frustrate annuity holders who thought they might have been able to sell their annuities for a cash lump sum in April 2016, however the move to delay this market seeks to safeguard pensioners and ensure adequate support is in place for policy holders making their decision.

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