Elaine Turtle: What will be in Budget...when we get one?

Recent developments in the Brexit saga and an inevitable snap general election led the Government to put the Sajid Javid’s Autumn Budget on hold last week to focus on getting Brexit done. The Chancellor has faced a lot of speculation on the content of his Budget after hints of tax cuts, although there has been no clear indication as to where this will be focussed. Mr Javid has previously described himself as a “low tax guy”, so perhaps we could see some changes to the pensions tax system – when we finally get the long-awaited Budget.So, what can we expect from the Budget when we finally get one?Industry experts have been calling for an overhaul to the pensions system, more specifically to tax on pension savings. First in line is an increase in the lifetime allowance (LTA), to give people the ability to save enough for retirement without the risk of being heavily taxed. The Government have guaranteed that the State Pension will rise by whichever is the greatest of inflation, earnings or 2.5% but the LTA will only increase by inflation, currently 1.8%. Although the idea of saving over £1 million into a pension pot may seem unachievable to most clients, if they are contributing for their whole working life and reviewing investments regularly, this isn’t such an unachievable amount. For clients with pension savings over the LTA and who have no protection in place, there may be a 55% tax charge, a massive deterrent to saving.Another overhaul that is needed is to the tapered annual allowance on pension contributions. Although the Government has promised to make changes to the tax system that penalises doctors and NHS staff, this doesn’t go far enough. Any changes to the tax system need to cover all industries. HMRC statistics show more than 37,000 people were subject to annual allowance charges in the year 2017/18, which doubled from the previous tax year. On top of this, annual average contributions fell in 2017/18, proving that there is a lot of hesitation around annual contributions due to the complications of the taper. It is a ludicrous system that adds more complexity to an industry that we are trying so hard to simplify.The money purchase annual allowance (MPAA) is another complication, £4,000 a year is far too low and it is time for this to be reviewed and reinstated to at least £10,000, which is what it was when it was introduced in April 2015.There is no doubt, an overhaul of the pensions tax system is needed, but with careful consideration and hopefully industry input.• HMRC statistics reference: https://www.gov.uk/government/collections/personal-pensions-statistics Elaine Turtle is a director at DP Pensions

Elaine Turtle: What will be in Budget...when we get one?

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