Last week it was widely reported that The Chancellor, George Osborne, has signalled that there will be no announcements from him in response to the “Strengthening the Incentive to Save” consultation until the 2016 Spring Budget statement.
This continued uncertainty has left commentators sifting through the tea-leaves in an effort to reach a consensus of opinion as to what the eventual outcome for UK pensions will be. But for me there is at least one key pointer within the following exchange recorded in Hansard this week:
“Richard Graham (Gloucester) (Con): The coalition Government freed pensioners from mandatory annuities and encouraged saving through ISAs and auto-enrolment. However, tax relief on contributions to pensions is expensive and favours higher-rate taxpayers much more than others. Does my right hon. Friend agree that that is an area in which sensible reform could be considered, in order to help to balance the budget without disincentivising saving?
Mr Osborne: My hon. Friend is right to say that we have taken significant steps to encourage saving, not least by giving pensioners control over their pension pots in retirement and by trusting those who have saved all their lives with the money that they have earned and put aside. He is an expert in these matters, and he will know that we are open to consultation on the pensions taxation system at the moment. It is a completely open consultation and a genuine Green Paper, and we are receiving a lot of interesting suggestions on potential reform. We will respond to that consultation fully in the Budget.”
The key clue is not so much in The Chancellor’s response – more the source of the question.
Followers of our updates will note that this point was raised by a fellow Conservative MP, and it is therefore more than likely that the question was “on message” from the governments point of view. And given that Higher-Rate tax relief was highlighted in this question it would seem that this one component of the system is set for major reform. There may of course be greater change afoot as well – but employers would be well advised to at least notify their higher-earners of the possibility of a swift change to their pension’s tax relief position come 2016.
For more information on the consultation and likely outcomes, please speak to your usual Jelf consultant.
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