Advisers have broadly welcomed the news that government will leave pension tax relief unchanged in the upcoming Budget, but predict that it is only a politically motivated temporary reprieve (IFA Clifton Bristol).
Chancellor George Osborne has dropped plans to either scrap upfront relief in favour of a pension ISA with tax-free withdrawals from ages 55, or introduce a new flat rate of tax relief, which would have benefited lower earners and hit the wealthier core of Tory voters.
Martin Dodd, an advisor told FTadviser the U-turn was an “enormous relief” because “constant change undermines trust” in pension saving.
However, advisers have expressed concern that the proposals are far from dead and buried, after HM Treasury spokesperson left the door open for the reforms to be implemented at a later date, saying that now was “not the right time” to make changes.
Dropping plans that were unpopular with many Tory MPs would ensure party support for the government’s position to stay in Europe ahead of the upcoming referendum on the issue, they suggested.
“I think the Pisa (Pension ISA) is probably dead, but flat rate tax relief will come back if we vote to stay in (Europe) and George Osborne is still at No 11, “Darren Cooke, an adviser said.
The expectation that other aspects of pensions could still be reformed in this week’s Budget was widespread among advisers.
Alistair Cunningham, financial planner said the abolition of salary sacrifice is a potential target.
Lifetime allowance and annual allowance limits could also be changed, Mr Cooke said, as “sadly, the door is still open for him to tinker with (those)”, with the possibility that the annual allowance could become “use it or lose it, so no carry back to previous years”.
Andrew Moore, an advisor said “ I would prefer retirement wealth to build up more widely a retirement ISA with a top up of 33% would have done that”.
(FTAdviser.com/FA, Laura Miller)
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