George Osborne has caused confusion over the Government’s pension tax reform plans after the Chancellor claimed his decision to scrap the 55 per cent tax on death would apply from today.
Speaking at the Conservative party conference this afternoon, Osborne announced the abolition of the tax penalty on pensions taken before the age of 75.
Earlier today the Treasury said the changes will take effect from April 2015 but in his speech Osborne suggested the new rules would apply from today.
He said: “People who have worked and saved all their lives will be able to pass on their hard-earned pensions to their families tax-free. Effective from today.”
A Treasury spokesperson told Money Marketing the tax cut will apply to payments made after April 2015 and that Osborne meant that people could “benefit immediately” because they could defer taking their pension until April.
It remains unclear whether the savings of people who have already died will be subject to the current or new tax rules.
AJ Bell technical resources manager Gareth James says: “The confusion demonstrates how important it is not to rush into financial decisions on the basis of political soundbites but to wait until legislation makes it absolutely clear how the rules will work.”
It is not the first time Osborne has contradicted a Treasury statement. His Budget address infamously promised free, impartial, face-to-face “advice” for retirees but this was quickly downgraded to “guidance”.
James Hay head of technical support Neil MacGillivray says: “Osborne’s speech makes the situation very confusing because the announcement says the cut comes in from April 2015. It’s a problem with these kinds of speeches, there was no mention of the 45 per cent death tax, instead they focus on the removal of the 55 per cent charge. The devil’s always in the detail.”
EA Financial Solutions IFA Minesh Patel adds: “They [politicians] like to evangelise when they speak generally about what they’re doing, the reality is rarely as dramatic as their speech. It’s a good vote winning policy particularly if you think the changes are coming in from today, saying the changes go live in April doesn’t have the same effect.”