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Chancellor sticks his head in the sand on pensions

Chancellor sticks his head in the sand on pensions

TMI-New-Logo-150x150 copyMatthew Brown, Private Client Partner at Thomas Miller Investment, comments on changes around pensions rules in the Autumn Statement

We had a new Chancellor at the despatch box today, and like his predecessors he couldn’t resist tweaking the pensions’ rules.  What is revealing though is that he has all but ruled out tackling the state pension triple lock in this parliament and has deliberately stuck his head in the sand, doubtless concerned at the voting power of the silver haired masses.

We have instead a very peculiar tweaking of the rules on the amount that can be placed into pensions by the over 55s once pension monies have accessed flexibly.  By reducing the Money Purchase Annual Allowance, or MPAA down from £10,000 to £4,000 the Chancellor has claimed he will reduce the incentive of claiming tax relief twice by accessing money flexibly and then putting it back into a pension scheme.

The Treasury must be concerned they are on a sticky wicket on this issue as they have felt the need to launch a consultation paper to check if the proposed actions would work in practice.

We now have three Annual Allowance regimes – £40,000 as the standard AA, £40,000-£10,000 for those caught by the tapered AA, and £4,000 for those on the MPAA.  Given that the merger of Pension Wise with the Money Advice Service and TPAS is tacit acknowledgement of the government’s failure to provide effective pension guidance, the treasury will doubtless raise revenue from people making honest mistakes. This will hurt the individuals concerned far more than it will raise any significant revenue for the exchequer.

If the Chancellor had been serious about tackling the ever increasing cost of the state pension he would have dealt with the triple lock.

One universally acclaimed proposal the industry and indeed the country can unite on is that we will now only have the Chancellor fiddling with pensions once a year, instead of twice as previously.

We had a new Chancellor at the dispatch box today, and like his predecessors he couldn’t resist tweaking the pensions’ rules.  What is revealing though is that he has all but ruled out tackling the state pension triple lock in this parliament and has deliberately stuck his head in the sand, doubtless concerned at the voting power of the silver haired masses.

We have instead a very peculiar tweaking of the rules on the amount that can be placed into pensions by the over 55s once pension monies have accessed flexibly.  By reducing the Money Purchase Annual Allowance, or MPAA down from £10,000 to £4,000 the Chancellor has claimed he will reduce the incentive of claiming tax relief twice by accessing money flexibly and then putting it back into a pension scheme.

The Treasury must be concerned they are on a sticky wicket on this issue as they have felt the need to launch a consultation paper to check if the proposed actions would work in practice.

We now have three Annual Allowance regimes – £40,000 as the standard AA, £40,000-£10,000 for those caught by the tapered AA, and £4,000 for those on the MPAA.  Given that the merger of Pension Wise with the Money Advice Service and TPAS is tacit acknowledgement of the government’s failure to provide effective pension guidance, the treasury will doubtless raise revenue from people making honest mistakes. This will hurt the individuals concerned far more than it will raise any significant revenue for the exchequer.

If the Chancellor had been serious about tackling the ever increasing cost of the state pension he would have dealt with the triple lock.

One universally acclaimed proposal the industry and indeed the country can unite on is that we will now only have the Chancellor fiddling with pensions once a year, instead of twice as previously.

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