A government with a big majority may be better positioned to change the pension tax relief system

19th April 2017 by Steve Herbert

They say that a week is a long time in politics.  So the fortnight since I posted this article on the Lifetime ISA and potential changes to pension tax reliefs could now be considered an age.

For yesterday’s surprise announcement of another General Election in the UK once again throws many certainties and assumptions on domestic policy decisions up into the air.

If – as some as are already predicting  – the election results in a large Conservative majority, then the electorate might well expect to see many of the more potentially difficult domestic policy decisions fast-tracked to near the front of the legislation pile.  And pension tax relief is one such consideration.

The potential short-term monetary gains for the Treasury of changing the system are, I think, both well-known and understood, and it is probably only because of the EU Referendum and the Government’s currently slender parliamentary majority that a decision was not taken last year by George Osborne to make a major change in this area.  Both of these obstacles could be merely a finer point of political history by the 9th June.

Of course the actual political promises made around pension tax reliefs by all the main parties – and perhaps most importantly the Conservatives – will not be known until the publication of their individual manifestos.   But change in this space remains possible, and the pensions industry, employers, and pension savers should all perhaps ready themselves for yet further alterations to the fabric of the UK pension system.

Yet for now – and presumably at least the entirety of the 2017/18 tax year – the very generous system of pension tax reliefs remains in place and available to savers.

This leads me nicely to my conclusion.  At the risk of sounding like a broken record, I would like to repeat my mantra of many years (and one that I have used regularly since the financial crisis of the last decade):

“Pension savers should continue to make hay whilst the sun shines.”

 Steve Herbert is Head of Benefits Strategy at Jelf Employee Benefits