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Missed Budget opportunities leave advisers in the lurch

The world of financial services, and the pensions industry in particular, stood in anticipation of the outcome of the Spring Budget.

Was Chancellor Philip Hammond going to make a name for himself with a bold and forward thinking plan?  Or was he going to follow in the footsteps of his predecessor and continue with the murdering of pensions as we know them with an extension of the Isa regime?

Signs he had a good grasp of affairs have been shown with the reversal of the unpopular second- hand annuity market. But hopes were dashed when he proposed to introduce a reduction to the money purchase annual allowance from £10,000 to £4,000 in his last Autumn Statement.

This proposal had been universally slated as shutting a door that was barely ajar and hardly causing much in the way of a drought to the Treasury.

It was another sign of tinkering where none was necessary and the responses to the consultation were clearly in favour of dropping the idea.

An opportunity to have listened to the industry and acknowledge the damage caused by continual changes to a system already difficult to comprehend was there but ignored. The proposed change was implemented as originally outlined.

Advisers will now have to revisit all their clients in flexi-access drawdown to see which might be affected and which in capped drawdown should now stay there to avoid the MPAA – even though it will mean a reduction in capped drawdown as a result of the new GAD table implementation in July.

They will also need to review which of their clients had planned to use flexi-access to phase retirement over the next few years – a process previously championed by the Treasury – but whose own and employer continuing contributions could now result in a tax charge.

Once again, this seemingly minor change has demonstrated how impossible it can be to plan even one year ahead, as it was outlined in November and in force only five months later.

The only other mention of pensions was in relation to the inequality of basic state pension entitlement for the self-employed compared with the lower National Insurance rates they pay.

However, the proposal to increase their Class 4 NI contributions to meet this came under heavy attack and was dropped altogether last week.

All the while, the spectre of George Osborne’s July 2015 consultation on the tax-incentivised methods of saving for retirement refuses to go away. Change is afoot; we just do not know when or how.

So, was this otherwise “pension friendly” Budget welcomed? I would suggest not really. Its ongoing silence on the key issue of the current tax regime and therefore the ability for the electorate to plan with certainty has left us hanging in the balance.

Martin Tilley is director of technical services at Dentons Pension Management

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