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Govt showing early signs of promise

It is still very early days but it appears the coalition Government really is looking to move towards the kind of pension simplification that the industry has been crying out for. The commitment in the emergency Budget to scrap the previous administration’s complex proposals around higher-rate pension tax relief in favour of a much lower annual allowance is a very welcome move.

The speed at which the Government is looking to scrap the age 75 rule and the concerns that have been raised regarding Nest’s interaction with means-testing also point to a goal of simplification. Elsewhere in the Budget, Chancellor George Osborne’s refusal to introduce a tapering system for capital gains tax or means testing of child benefit both appear to show an administration focused on removing complexity from the tax system.

The respective reviews of Nest and auto-enrolment and public sector pensions are hopefully a sign that the Government realises all the pieces of the pension jigsaw must be addressed together. All this should bode well for savers who have traditionally been turned off by the complexities of the financial services landscape.

Of course, what has been announced already is but a few small steps and debate now turns to how the Government can build on these welcome announcements with more fundamental reforms.

This month, Retirement Strategy catches up with Michael Johnson, author of a thought-provoking recent report published by the Centre for Policy Studies. Johnson suggests the Government should go much further in striving for simplification by combining the current separate regimes for Isas and pensions. He proposes starting this off by introducing a combined annual allowance for Isas and pensions of £45,000 and allowing some fluidity by offering retrospective tax relief for Isa funds moved into a pension and a greater flexibility about when you can take your tax-free cash lump sum. He says these changes could be a precursor to a full harmonisation of the two tax regimes.

Elsewhere in this issue, Skandia platform marketing manager Adrian Walker raises some concerns about the Government’s proposals for an annual allowance, warning it could be too restrictive and suggesting that individuals should be able to carry over unused pension contributions for a three-year rolling period.

James Hay/IPS business development director Richard Mattison hits out at HMRC over its stance on pre-55 drawdown transfers. If the Government is seriously committed to removing unnecessary complexities, surely this is another area that needs to be addressed.

Paul McMillan
Retirement Strategy


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