It doesn't seem as though we've had time to get used to the last set of pension reforms, but if this week's Budget was anything to go by, we could be in for some more changes…
In his speech, Chancellor George Osborne said that he was open to further "radical change" for the pensions industry, specifically suggesting that pensions could be treated like ISAs. His idea was that savers could pay into their pension from taxed income and receive a top-up from the Government, and then take it out tax-free when it's needed to be used as pension income.
However, this isn't yet policy, with Osborne saying that this idea (and others like it) would need careful consideration before anything went ahead. As such, a Green Paper is being published for consultation, giving everyone involved the time to mull over the proposals, a move that has been welcomed by the industry.
However, there was one aspect of pension change that appears set in stone, and that's the reduction to the level of tax relief on pension contributions for higher earners. Currently, people can contribute up to £40,000 a year to their pension tax-free, but from April 2016 this tax relief will be limited to £10,000 per year, based on earnings.
However, while the majority of workers won't be affected, there are still concerns that this could dis-incentivise pension saving, particularly when combined with the reduction to the lifetime allowance (as announced in March's Budget). It also doesn't take into account the possibility that some people may earn a lot but don't have any pension savings, so limiting them, particularly later on in their working career, could mean they're unable to amass a suitable pot.
As Tom McPhail of Hargreaves Lansdown points out, "anyone caught by this restriction, who isn't fortunate enough to already have enough in their pension, is going to find building up a decent retirement income has now become hugely challenging". Andy Cumming of Close Brothers Asset Management added that "we need to be encouraging greater pension saving across the workforce, and limiting the amount one section can set aside will not help build a nation of savers… The shrinking lifetime allowance has already penalised long-term pension saving".
So, just what else could be in store for the pension system? Who knows! One thing's for sure – nothing should put you off saving for your future. Be it through a workplace pension, ISA or (ideally) a combination of vehicles, make sure to save as much as possible and you'll hopefully get the retirement income you're hoping for.
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