A J Bell wants the Government to introduce a 10-year moratorium on changes to pension tax relief to end the yearly pre-Budget speculation which causes “abnormal behaviour” in savers.
In the build-up to Chancellor George Osborne’s Budget last week, the Government was rumoured to be considering cutting higher-rate pension tax relief through a reduction in the annual allowance from £50,000.
This followed comments from LibDem Treasury chief secretary Danny Alexander in February, suggesting the Government could not afford to continue with the levels of tax relief offered under the current system.
AJ Bell marketing director Billy Mackay says speculation about possible pension tax changes damages savers’ confidence in pensions.
He says: “There has been a great deal of speculation in recent weeks regarding the possibility of restrictions in higher-rate tax relief, tax-free cash or the annual allowance. This sort of speculation damages confidence in pensions and causes abnormal behaviour in pension savers.
“We have seen significant increases both in individuals making contributions to their pension and choosing to take their tax-free cash lump sum because of the fear of these restrictions.
“This type of saving behaviour, driven by a fear of change, costs the Government money because of the additional tax relief it has to pay on the pension contributions.
“If the Government wants to restore confidence in pensions and discourage any unnatural behaviour, it would be advised to announce a moratorium on changes to the key pension rules on tax reliefs and benefits.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “I want to see the Government getting on the front foot. It should commit to leaving pension tax relief alone for at least 10 years and challenge Labour to do the same.”
A Treasury spokesman says: “Tax changes on all issues, including pensions, are a matter for that Chancellor at the Budget.
“The Government remains committed to supporting pensioners through tax relief on pension saving, up to generous allowances.”