Fidelity urges Govt to delay annual allowance taper

Pensions-savings-retirement-piggy bank

Chancellor George Osborne should use the Autumn Statement to postpone the introduction of the tapered annual allowance, Fidelity says.

Under the Government’s current plan people with “adjusted income” over £150,000 will see their annual allowance reduced from £40,000 down to £10,000 for those earning over £210,000.

But experts have warned the complexity of the rules is heaping pressure on employers and may simply lead to people contributing the minimum £10,000 a year.

Fidelity International head of retirement Richard Parkin says not only will “hard working business people” be affected but the system may well be scrapped within 12 months if the Chancellor decides on broader reform of tax relief.

He says: “This policy doesn’t just impact city fat cats but also hard working business people and professional public servants such as GPs and surgeons.

“These rules are complex and have introduced significant uncertainty and additional costs not only for the individuals affected but also their employers and pension plan trustees.”

He adds: “The Chancellor has flagged that he will be announcing further changes to incentives in the 2016 Budget – expect these to impact high earners, to be relatively radical in nature and to be effective within a relatively short time frame – perhaps as early as April 2017.

“It therefore seems unreasonable to expect employers and pension plan trustees to introduce and operate special arrangements for high earners that will almost certainly be changed within 12 months and probably won’t generate significant savings for government in that time.”

The Autumn Statement will be delivered by the Chancellor on 25 November.