The pension and savings industry has expressed release that there were not more significant raids on pensions in the Budget, beyond widely-trailed changes to salary sacrifice.
Prior to the Budget there was considerable speculation that Rachel Reeves might reduce the amount that savers can take as tax-free cash from pensions, or remove higher-rate tax relief.
As a result many in the pensions industry are calling for the Government to pledge to protect current pension tax breaks, to create stability in the system and prevent people making financial decisions that may not be in their longer term best interests.
However many across the industry said they were disappointed that Reeves had targeted workplace salary sacrifice schemes.
Aegon pensions director Steven Cameron says: “Those sacrificing more of today’s salary for a higher contribution towards their retirement income may question why the Chancellor is penalising them.”
He pointed out that this changes comes just after the Government has set up an independent Pensions Commission look at retirement adequacy.
He adds: “However, the change mustn’t be allowed to discourage people from saving in pensions for their future. Despite these changes, the Chancellor confirmed pensions continue to offer the benefits of tax relief and a tax-free cash entitlement.”
“This year, like last, there was extensive and harmful speculation that the Chancellor would cut entitlements to the tax-free lump sum.
“Given pensions are long-term investments, which can’t be accessed until age 55 (rising to 57 in 2028), it’s important that people have confidence in these tax incentives, encouraging them to save for their futures.
“We can’t afford another year of Budget ‘hokey cokey’, which has led to some individuals taking pre-Budget actions they might later regret. We urge the Government to confirm no further changes to the pensions tax system, at least for this Parliamentary term.”
Hargreaves Lansdown head of retirement analysis Helen Morrissey says: “There was a huge sigh of relief today as tax-free cash cuts did not feature in today’s Budget speech.
“This has been one of the more damaging rumours in the run up, with increased numbers of people looking to take their money before a change could be announced. It’s a move that has potential to do huge damage to people’s retirement resilience.”
She adds: “The actions people take when there’s a vacuum of information can be very damaging and underlines the importance of putting in place a stable long-term framework for pension tax – something the ongoing review into pension adequacy can do.”
HMRC recently confirmed that applications to take tax-free cash cannot be cancelled.
