Pensions tax relief consultation: “Constant change can be detrimental”

5th October 2015

Lucy Dunbar, senior associate at Sackers, takes a look at HM Treasury’s consultation on pensions tax relief…

Whilst we support measures that will help individuals benefit from a more secure retirement, we are surprised that a radical overhaul of the system may now be on the cards.

There can clearly be a tension between managing public finances and achieving the stated objective of strengthening the incentive to save. However, care should be taken to avoid a situation where existing incentives are reduced, with the result that lower levels of pension saving actually ensue.

Sustainability means individuals being able to understand what they can (and should) save and when, and what they will receive in the future.

For a system to be sustainable, it also needs to be left alone. Although the introduction of automatic enrolment is achieving its aim of increasing the take-up of workplace pension saving, other changes, such as the successive reductions in both the LTA and AA, can be seen to be having the opposite effect.

Constant change can be detrimental, leading to increasing distrust of the pensions system. Further changes will only exacerbate this problem.

Schemes are still taking on board the rapid changes to private pensions that have been introduced in the past few years, such as the introduction of the new retirement flexibilities for DC savers in April 2015. If further changes are introduced, especially if these fall on the more radical end of the spectrum, these must be fully considered, with trustees, employers, providers and others being given sufficient time and support in relation to implementation.

1 thought on “Pensions tax relief consultation: “Constant change can be detrimental””

  1. Jive Bunny says:

    Ohh don’t you just love it when finance employees talk tio the public in finance speak?

    For any one who doesn’t understand her abbreviations they are as follows:

    LTA = Lifetime Allowance – the total amount you are allowed to have in a pension pot

    AA = Annual Allowance – the maximum you are allowed to save eac year into a pension

    DC = Defined Contribution – a type of pension where the only guarantee is the minimum amount you have to pay into it.

    The Government of all hues has made 35 changes to the State Pension over the last 36 years (most of them to the detriment of pensioners)so why should private pensions be discriminated against??

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