Pensions experts are eyeing possible changes to the annual allowance, the state pension triple lock and self-employed taxation ahead of June’s general election.
The major political parties have been trickling out manifesto commitments since Theresa May called the snap election on 18 April.
The Conservatives have committed to maintaining the UK’s 0.7 per cent of GDP spending on overseas development aid and to capping energy prices, while Labour is eyeing increasing tax rates on wealthier individuals and introducing a £10 an hour minimum wage.
Old Mutual pensions technical manager Jon Greer says he expected “uncontentious” aspects of the upcoming Finance Act, including changes to the taxation of overseas pensions, to keep being “nodded through” by whoever is in power, but other changes such as to digital tax collection may have to be pushed back in the wake of the election.
The Government confirmed yesterday that cuts to the money purchase annual allowance and tax-free dividend allowance would be delayed.
Greer is hopeful for reform of the tapered annual allowance for high earners, but does not predict significant changes to pensions policy while Brexit takes Government attention.
Greer says: “The tapered annual allowance is the bane of everyone’s life; IFAs find it complicated and justifiably so.
“Are we going to see anything except small tweaks to allowances? It’s unlikely we are going to see fundamental changes where there is probably not scope for that within Government departments outside the main game of Brexit.”
He adds: “I would like to see the Government come out with a long-term strategy for taxation of the self-employed. Its ripe for reform and they haven’t really set out a long term strategy.
“If you are going to tax them similarly then change across the piece is going to be quite fundamental…I don’t think it’s something that’s going to be able to change overnight by any means. Rather than change a band you need something more fundamental than that.”
Zurich senior public affairs manager Laura McAlpine also says the Government should look at how self-employed retirement savings are taxed: “Despite growing vastly in number, self-employed workers saving for retirement benefit from fewer incentives to save. Self-employed workers should be allowed to deduct pension contributions from profits, giving them an effective tax break on NICs, which would help even out this disparity.”
Aberdeen Asset Management retirement savings head and former shadow pensions minister Gregg McClymont says that the Conservatives’ commitment to the triple lock remains in doubt.
He says: “The triple lock mood music seems very clear from a Government point of view. The only comment I would make is its worth remembering out state pension is lower than most comparable countries. I’m not sure that’s on the Government’s mind.”
McClymont says he does not expect wholesale changes to self-employed pensions such as mandatory auto-enrolment, but that the Conservatives will want to leave more options on the table than in previous manifestos.
He says: “I have not seen any evidence the Government is thinking seriously about that. We saw how big the reactions to the NICs rise was; even putting that back on the table would be quite a significant move.”
“The fact it’s not a close race though means things are less likely to be ruled out; generally, Governments like to keep their hands as free as possible, they only do so if they are worried about groups of voters.”
Former pensions minister Steve Webb, now Royal London policy director, says that the Government’s need for short-term funds could drive myopic changes to pensions and tax.
He says: “The Government is broke. It needs cash now. They’ve got to reverse the self-employed NICs, make the money to reverse the £300m they lost with probate, and they need to spend money on social care and everything else under the sun.
“While you can do a big profile restructure of tax relief, that would take three years. The risk is that what we get is short term salami slicing again.”
Webb says the annual allowance looks a likely target for cuts.
“The annual allowance is the biggest risk…They could say that with Isa limits going up do you really need to pay £40,000 into a pension? If you announced a change in November, you can probably implement it the following April, so you can get the dosh quickly.”