The Government looks set to delay a raft of key reforms including the reduction in the money purchase annual allowance, pensions advice allowance and tax-free dividend allowance cut.
In a House of Commons session on amendments to the Finance Bill which would have introduced the cut, the Government has signalled its intention to oppose clause 16, which would reduce the MPAA from £10,000 to £4,000.
The move was first announced in the Autumn Statement and following a consultation was confirmed in the Budget. It was supposed to be introduced on 6 April.
The Government is also seeking to oppose the inclusion of clause 5, which would reduce the nil rate tax band on dividends from £5,000 to £2,000, and clause 12, which would take employer funded advice contributions of up to £500 out of income tax.
Govt backing away from cut to MPAA may signal wider changes to pensions tax relief after election. Radical reforms possible?
— Ros Altmann (@rosaltmann) April 25, 2017
The Government is not looking to change its proposed tax changes to overseas pension transfers, however. Qualified recognised overseas pension scheme transfers are set to be hit with a 25 per cent tax charge unless they are made within the European Economic Area or the Qrops is provided by the individual’s employer.
The Finance Bill will be debated for up to five hours today, starting no earlier than 12.30pm.
The pensions industry had mounted vocal opposition to the MPAA cut in particular, arguing it removes some of the flexibility of the pension freedoms, and will discourage part-time work combined with taking pension income to fund a gradual retirement.
Technical Connection head of pension strategy Claire Trott says: “It isn’t a surprise that some changes announced in the Spring Budget may be put on hold because of the snap general election.
“Some of this will be welcomed in the grand scheme of things but it does make planning very difficult. Advisers will have told clients to opt out of some schemes or cut back on contributions because it was believed that the MPAA would be cut to £4,000 but this appears unlikely now with the rush to get the Finance Bill through before the election.
“This doesn’t mean it won’t happen but it will need to go in the next Finance Bill which will take time and can’t really be back dated to the beginning of the tax year. This and other changes will leave clients and advisers in limbo again which really isn’t helpful for anyone.”