An amendment to the tapered annual allowance or a £30,000 annual allowance would be the most politically acceptable ways for the Chancellor to raise tax from pensions tax relief, former minister Steve Webb told the Corporate Adviser Summit today. John Lappin reports
Royal London director of policy Steve Webb said he did not expect a major shake-up in pension tax relief in the next Budget, though if there was any change it would most likely involve the annual allowance or the tapered annual allowance. He added that the idea of a standing pension commission is not a good one, and has no chance of getting off the ground.
He said: “What will he do this November? Quite possibly nothing. He might do something with the annual allowance or the tapered annual allowance. What would you get if you had a £125,000 threshold and not £150,000, if you took away £2 in £3 not £1 in £2 – £300m or £500m? It would pay for a few nurses.”
Webb said there would only be limited political fall-out from say a £30k allowance, saying it would hit people like deputy head teachers who got promoted to head. It had had an impact on specific jobs in the past.
“Looking at older GPs and older consultants – why are they leaving the NHS? Partly because of pensions tax relief.”
Webb said if he could wish for one thing it would be that the government left tax relief alone for now.
“If we could get some stability of tax relief, if Philip Hammond stood up and said he was leaving it for the Parliament, for all its flaws, we would all cheer.”
He warned that pensions are now a residual issue in the eyes of government and the pension minister’s role is an afterthought. Similarly any cutting of tax relief may simply be about raising money and involve very little long term strategic thinking.
He said Chancellor George Osborne had attempted to change tax relief more significantly a few years ago but no-one could agree what to do.
Webb vociferously opposed the idea of a standing pension policy commission – something that is supported by many in the pensions industry adding that the reality of politics made it unlikely.
“You battle all your life to become a candidate, then you battle to become an MP, then to get to be a minister. And your first act as a minister is to hand power over to someone else? It ain’t going to happen.”
He suggested the best you might hope for is people of goodwill come together to think strategically long term to feed in to policy.
He added: “The Turner Commission is an example of it working but think about long term care. In New Zealand politicians distance themselves from the independent commission when it suits them.”