Advisers have criticised the Government’s decision to push back legislation that would introduce cuts to the money purchase annual allowance and tax-free dividend allowance for adding further uncertainty to client plans.
Yesterday, the Government said it would remove the clauses in the Finance Bill that would introduce both measures, as well as a £500 tax break for employer arranged advice.
It later clarified it would still look to impose the measure “at the earliest opportunity” but the snap general election meant they would have to wait until the next Parliament.
There is still a lack of clarity over when the rules will apply from however. The MPAA was due to come into effect from this April, and though the tax-free dividend allowance was set to be introduced from April 2018, there is no guarantee this will occur.
Richmond House Group managing director Paul Beasley says: “The whole issue with pensions is over-complexity. It makes it very difficult to plan.
“If you look at the annual allowance, the lifetime allowance, the £150,000 limit and the complex calculations you have to go through once you get beyond that; clients in those circumstances will often be getting bonuses or dividends that they would want to add to their pensions and it makes it difficult at this time of year to plan what their contributions are going to be in the next 12 months.
“We try to do the best for our clients but we’re not always able to do that if there’s so much uncertainty.”
Beasley says while his firm will not be making changes before policy timings are nailed down, the specialist portfolio the firm set up to generate dividends up to the £5,000 tax-free allowance may now have to be discontinued.
Yvonne Goodwin Wealth Management managing director Yvonne Goodwin says: “With the MPAA we have a couple of clients who would have been affected by it coming in in April, people who were selling their firms this year and would have liked the opportunity to shelter more than £4,000 in a pension.
“As a client, do you risk it and go to £10,000, the current legislation, or do you listen to the Government? We might just err on the side of caution, but I would have to be led by the client and what they wanted to risk.”