By Sam Brodbeck and Tessa Norman
George Osborne is being urged to use next week’s Autumn Statement to scrap pension exit penalties, the new annual allowance taper and extend the stamp duty exemption to equity Isas and Sipps.
Ahead of the Chancellor’s speech, Hargreaves Lansdown head of pension research Tom McPhail says the Government needs to intervene over early exit charges on pension policies.
He says: “We need some intervention to curtail the more egregious transfer penalties that are sometimes contractually legitimate but in the context of pension freedoms no longer justifiable.
“I think some of the exit penalties that are written into contracts from 10, 20, 30 years ago are no longer justifiable in today’s environment. I’m looking at the Government to intervene on those.”
In September the FCA published its audit of exit penalties levied by providers.
It found nearly half a million pension customers have policies subject to exit fees of over £1,000.
Aegon wants the Treasury to U-turn on its plans to taper the annual allowance on pension contributions for those earning over £150,000 from April 2016.
Regulatory strategy manager Kate Smith says: “We would like the Government to scrap the lifetime allowance and the annual allowance taper. These are very counter intuitive.
“At some point in time we expect there will be a massive change so we think the Government should wait rather than putting these complicated rules in place that do not help people.”
Almary Green managing director Carl Lamb agrees: “I would like to see no further changes to pensions legislation and the scrapping of the lifetime allowance.
“I would also like to see an increase in the amount that can be put into Isas to encourage consumers to save.”
Stamp duty exemption
The Wealth Management Association wants the stamp duty exemption on AIM shares extended to include long-term investments such as equity Isas and Sipps.
It says: “The cost to the Exchequer is difficult to quantify precisely but when WMA commissioned work in this area in 2014 it was estimated that so-called bought Isa consideration of £15.7bn would result in loss of stamp duty reserve tax revenue at £78.6m.
“It would, however, enable the Government to market the Isa as a truly tax-free savings and investment wrapper.”
AJ Bell thinks the Government should align the amount non-earners’ can save into a pension with Junior Isa limits to boost saving for children.
The £3,600 annual allowance for non-earners has stayed at the same level since it was created in 2001. Junior Isas, on the other hand, allow contributions of up to £4,080 a year.
AJ Bell head of technical resources Gareth James says: “One of the key uses of the non-earner pension allowance is for parents or grandparents to save for children.
“Aligning this with the Jisa allowance to create a single, consistent children’s saving allowance across both Jisas and pensions would make it easier for parents and grandparents to understand how much they can invest. It would also enable those with income from sources other than traditional earnings to save more for their retirement.”
Tim Page, director, Page Russell
The Chancellor may attack salary sacrifice because he is losing a lot of money through that due to auto-enrolment. I also expect to see a crackdown on contract workers.
Now the Government has clamped down so much on the annual allowance, I would like to see the madness that is the lifetime allowance removed.
But given the poor borrowing numbers for October, Osborne will not be in a particularly generous mood. Any money he has spare will be needed to make the cuts to tax credits more palatable.