Chancellor George Osborne was been warned that any move to further cut the annual allowance for tax privileged pension saving could drag “huge numbers” of defined-benefit scheme members into the reporting requirements.
Speculation has been mounting ahead of next week’s Budget that the Government will reduce the annual allowance from the current level of £50,000.
Analysis from Standard Life suggests lowering this to £40,000 would save the Treasury £600m while cutting it to £30,000 would save between £1.6bn and £2bn.
However, A J Bell technical marketing manager Gareth James says a reduction in the annual allowance will increase the workload and costs for employers with DB schemes.
He says: “With any change in the annual allowance the Government needs to balance its fiscal needs with the risk and consequences of increasing the complexity for pension savers.
“If the Government reduces the annual allowance it potentially drags huge numbers of defined-benefit members into the associated reporting requirements, and adds to the workload and costs for their employers and administrators.
“An argument can be made for moderating carry forward rather than the annual allowance although, if confidence in pensions is to be maintained, any movement in this area needs to be accompanied by a commitment to leave the key pension rules alone for a number of years.”