The consultation on pensions "incentives" has been delayed

The consultation on pensions “incentives” has been delayed (Photo: Flickr/Stevie Gill)

Possible changes to pensions following the most recent Pension Consultation initiated by George Osborne post his July 2015 Budget seem unlikely to see the light of day until March 2016 at the earliest. This suggests that any alterations are likely to be a little more radical than purely tinkering around the pension edges.

As a way of background, the consultation document posed eight questions and sought feedback from the financial industry and interested parties. The process hoped to elicit constructive comment around resolving current pension complexity, getting a feel for what simplicity may look like, views on taking personal responsibility for long term saving and facilitating the utopia of a sustainable, tinker proof pension system.

Issues that consistently get kicked around for change or merit consideration are:

  • The continuation of pension tax relief on contributions; the overriding opinion being that claiming income tax relief will be stopped or at the very least reduced.
  • Would pensions be better served looking and feeling more like an ISA, so no tax relief on the way in but tax free growth and tax free withdrawals
  • What considerations should be given to the Annual Allowance, how much can be paid in whilst still enjoying income tax relief
  • Can some of the complexities that pension’s legislation appears to enjoy introducing be dispensed with e.g. the Lifetime Allowance, Input Periods, and Annual Allowances? It’s worth noting that since the introduction of Pensions Simplification in April 2006 we have counted in excess of one hundred changes to pension legislation or rules; most of these adding to rather than taking away levels of complexity

So in summary, a deferral to changes in pension’s legislation will hopefully herald the arrival of a sustainable and workable pension regime which is easy to understand and encourages long term savings. However, recent history suggests that changes may be purely to refill the Exchequer coffers through less generous reliefs or more penal allowances.

For some, taking advantage and acting now with a known set of rules might be more beneficial than waiting for a 2016 Budget announcement.

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