Former pensions minister Steve Webb called for the Treasury to relax rules which could act as a barrier to people seeking to rebuild their pensions when the current Covid-19 crisis is over.
Webb, now a partner with pensions consultants LCP, highlighted two groups whose pensions may be particularly hard hit by the current situation
- Those aged 55 or over who access their pension pots for emergency cash to tide them over
- Those whose are already drawing on their pensions, and have seen investments fall substantially in recent weeks
In both cases, these groups may be looking to rebuild their pensions in months and years to come. But if they have taken taxable cash from a DC pension, then that are currently limits on future pension contributions.
The Money Purchase Annual Allowance stipulates that in most cases those who have taken taxable cash are limited in future to £4,000 per year in contributions on which pension tax relief can be claimed.
Webb is calling for this to be lifted, saying as a minimum it should be £10,000 — the initial cap when MPAA was introduced. But he says it would be preferable to abolish it altogether, at least for a period of time.
Webb says: “Many people will have seen the value of their pension savings tumble in recent weeks, and others may feel that they have no choice but to access their pension savings to tide them over short-term financial pressures.
“In both cases, pension savings could be severely dented. Once the present crisis is over some people will be in a position to start building up their pension again, especially if they are still in work.
“The government must support people in this, rather than put barriers in place. The current £4,000 limit is far too low. If it cannot be abolished altogether it should at the very least be raised to the £10,000 figure from a few years ago.
“Rebuilding pension savings is going to be a challenge for many, so the government needs to show it is on people’s side, not standing in their way’.