The Budget & Pensions

In days of yore, when Sajid Javid was Chancellor, the Sunday Telegraph ran a report that suggested more action was to be taken against the group of middle earners (£100,000 to £210,000 a year) who have been vilified by successive Governments and are considered, amongst other things, to be undeserving of the full range of tax breaks to fund an adequate retirement.

Whether this was really a leak of a Budget policy or was simply a floating of an option to see the reaction it garnered is hard to tell. It got little traction elsewhere and hasn’t been floated again since so it’s possible we won’t see mention of it on March 11th.

What we will see, however, is an entirely new Chancellor. After the resignation of Sajid Javid, we now have the relatively unknown Rishi Sunak whose remit now falls more under Number 10’s wing than was previously the case.

So, what will we see? Or, more pertinently, what would we like to see?

The following is my wish list: –

  • Removal of the Tapered Annual Allowance – this much reviled rule reduces the Annual Allowance (the amount that can be paid into pensions tax free) for those earning in excess of £150,000. It is a nasty stealth tax that is either complete news to those affected or just plain misunderstood. And it works on a current year basis so is very difficult to plan for. Just look at the problems the NHS currently has reducing waiting times because doctors are not prepared to do additional work in light of the additional tax charges caused, and you can see the unintended consequence of this badly drafted legislation.


  • Confirmation that tax free cash will always be available from a Workplace Pension – a statement to this effect would produce certainty that Workplace Pensions are the best way to save for retirement. The oft produced veiled threats to it are unhelpful, to say the least, and create uncertainty in a system that requires very high degrees of certainty.


  • Reform of Tax Relief – a few years ago, Steve Webb (then Pensions Minister) floated the idea of a flat rate of tax relief for everyone but was shot down by the industry as the cost of implementing such a system was too high. I believed, at the time, the idea had merit and I am sure it still has. There are complex moral questions around this. “Pensions are taxed on the way out so there should be no tax on the way in” is a very powerful argument. However, if set at the right level, a flat rate tax relief of 25% or even 30%, would be a genuine incentive for basic rate taxpayers and still benefit higher rate tax payers as most will only pay basic rate tax in retirement. And it would be a far simpler system to administer for HMRC.

So, there you go, three relatively simple things Rishi can do that would boost the pensions arena.

Will they happen? I fear not but let’s see in a couple of weeks…

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Peter Murphy DipPFS

Benefits Adviser