View more on these topics

Govt confirms MPAA cut applies retrospectively

MPAA reduction will hit retirees from 2017/18 tax year despite legislation yet to be passed

Downing-Street-Sign-Politics-UK-700.jpg

The Government has confirmed that its cut to the money purchase annual allowance will apply retrospectively from April this year, despite having yet to enact it in legislation.

Amid the election, a number of measures – including the one to reduce the MPAA from £10,000 to £4,000 – were taken out of the Finance Bill to speed its passage through Parliament.

The Government had previously said dropping the Finance Bill measures did not mean there was any change of direction on reform. However, there was confusion over whether the MPAA cut would apply for the 2017/18 tax year.

In a statement today, the Treasury confirms this will be the case.

The statement says: “The Finance Bill introduced in March 2017 provided for a number of changes to tax legislation that were withdrawn from the Bill after the calling of the general election.

“The then-Treasury financial secretary confirmed at the point they were withdrawn that there was no policy change and that these provisions would be legislated for at the first opportunity in the new Parliament.

“The Government confirms that intention. It expects to introduce a Finance Bill as soon as possible after the summer recess containing the withdrawn provisions.

“Where policies have been announced as applying from the start of the 2017/18 tax year or other point before the introduction of the forthcoming Finance Bill, there is no change of policy and these dates of application will be retained. Those affected by the provisions should continue to assume that they will apply as originally announced”.

Former pensions minister and Royal London policy director Steve Webb criticised the announcement as “arrogant”.

Webb says: “It would be outrageous for Parliament to be debating in September and October what tax allowances will be from 6 April 2017.  Cutting the MPAA is an unnecessary measure in the first place, but it is particularly unacceptable to do so with retrospective effect.  How were savers meant to know in May who was going to win the election?

“This is an arrogant announcement based on the assumption that the DUP will vote with the Government on tax measures and so any tax change can be got through the House of Commons.”

AJ Bell senior analyst Tom Selby said that the news was a “bitter blow” for retirees.

He says: “We do at least have clarity on what the MPAA is for 2017/18, which means advisers and individuals can plan with a degree of certainty.

“But the reality is the UK pension tax regime is a mess, bedeviled by complexity and confusing even to seasoned industry experts. Rather than continuing to tinker with a broken system, the Government should carry out a root and branch review aimed at simplifying the rules and encouraging more people to save for retirement.”

Recommended

Pension-Pensions-savings-retirement-piggy bank

Advisers split on MPAA contributions as uncertainty continues

17 per cent of advisers would allow affected clients to contribute more than £4,000 as cut date remains unclear Advisers are responding cautiously to uncertainty around the money purchase annual allowance, with just 17 per cent indicating they will allow clients to contribute more than £4,000 by making the assumption the MPAA is still £10,000. The Government announced a […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 14 comments at the moment, we would love to hear your opinion too.

  1. Michael Tomlinson 13th July 2017 at 3:13 pm

    So for anyone who has already done the £10,000???

  2. Don’t you just love politicians….

  3. So does that also mean the changes to non-doms are also retrospective to 6/4/17?

  4. “…. despite having yet to enact it in legislation.”

    This is almost unbelievable in view of the fact that it is effectively retrospective legislation which any sane legislator avoids at all costs.

  5. Like Sascha, I agree we should have expected this – both sides of the house will be desparate for money and will just squeeze those that have it until they emigrate. As a firm we certainly haven’t advised anyone to do the £10k and keep their fingers crossed! More fool anyopne who has.

  6. brian bradshaw 13th July 2017 at 4:21 pm

    “the Government should carry out a root and branch review aimed at simplifying the rules and encouraging more people to save for retirement.”

    hmm..pensions simplification, now where have I heard that before?

  7. Paolo Buco nel Terreno 13th July 2017 at 4:32 pm

    It would be much better if the permanently ’employed’ civil servants, aka the tutor (that ‘train-up’ these uneducated, amateurish MPs that are given these ‘powers’ with no past experience whatsoever) are given full control to set policy…after all they have a much better understanding of the practical implications of any decisions taken, and have no political agenda, but are often ‘over-ruled’ by the very same MPs (i.e., pupils) in their conflicted quest to remain in power. And anyway, since when was the £10,000 MPAA cap such a major drain on the Exchequer anyway?…..contradicts the ethos to save for your future (regardless of whether someone wants to access some of their pension income early…probably due to an important fiscal need like debt removal or children’s further education, etc…). They’ve no idea of what happens in real life, especially when the average MP salary is £75k!!

  8. Not found evidence to support this article.

    The statement released yesterday contains no reference to the money purchase annual allowance.

    And I can’t find it in the draft legislation that they published yesterday.

    Can someone prove me wrong?

    • Simon, direct quote;

      “The Finance Bill introduced in March 2017 provided for a number of changes to tax legislation that were withdrawn from the Bill after the calling of the general election. The then-Financial Secretary to the Treasury confirmed at the point they were withdrawn that there was no policy change and that these provisions would be legislated for at the first opportunity in the new Parliament.

      The Government confirms that intention. It expects to introduce a Finance Bill as soon as possible after the summer recess containing the withdrawn provisions. Where policies have been announced as applying from the start of the 2017-18 tax year or other point before the introduction of the forthcoming Finance Bill, there is no change of policy and these dates of application will be retained. Those affected by the provisions should continue to assume that they will apply as originally announced.

    • It has now been confirmed

  9. I hope the MP’s are as enthusiastic about voting this piece of retroactive legislation down as they are about obstructing the “Great Repeal Bill”!

  10. Terry Mullender 15th July 2017 at 9:36 am

    Arrogant in the extreme. Correct Steve Webb. Enough said.

Leave a comment