News of the general election has been unsettling for advisers. Not so much due to the political uncertainty but more because it has interrupted scheduled legislation, leaving a number of issues in limbo.
This highlights again just how often policymakers fail to understand the practical impact of their decisions. It also suggests how little they recognise the importance of advice for the general public.
In order to get laws passed before the last day of the Parliamentary session, the Government cut a number of measures in the Finance Bill. Some announced in the Budget were casualties of this process, including the plans to reduce the money purchase annual allowance from £10,000 to £4,000.
Advisers have been left in a difficult position. The law currently allows clients to contribute £10,000 but the Treasury insists it has not changed its mind on the policy intent and plans to reintroduce the £4,000 limit, but we have no idea when the change might take effect.
Advisers will not want clients to miss out on a window of opportunity but they also do not want to risk advising them to do something which could later incur a tax charge.
Of course, they must warn the measure may be brought back in future but some clients may decide to take a chance and pay the full £10,000, hoping any tax charge will not be retrospective. Indeed, HM Revenue & Customs might find it difficult to justify taxing someone who acted on the basis of the law as it stands now, especially if they did not have an adviser.
Meanwhile, although the regula-tions allowing £500 to be withdrawn from a pension fund tax-free at any age, up to three times over one’s career, have gone ahead, the good news is offset by the disappointing decision to drop the plans for better employer tax breaks on pension advice. This sends mixed messages about the importance of people having access to individual advice.
The plan would have increased the income tax and National Insurance exemption for employer-arranged pensions advice from £150 to £500.
It would also have removed the cliff-edge which meant that, if the employer spent more than £150 on advice, the whole amount became taxable.
I recall many meetings with officials during my time as pensions minister to explain how the pension freedoms and auto-enrolment had made it more important than ever that people be encouraged to take proper advice.
If policy fails to properly support advice, or if it sends confused messages, the public will lose out. Recent research from Unbiased shows just how huge an impact financial planning can have on people’s future prosperity. It found UK consumers with a pension pot of £100,000 save an average of £98 more each month and receive additional annual income of £3,654 in retirement if they take advice.
So once the election is over, it is time for advisers to speak to their new MPs. Help them see the need for policy clarity and for reducing complexity. I know there is much cynicism and frustration with politics but as we negotiate our exit from the EU and with our population rapidly aging, advisers have a key role to play in helping the public. It is an important time to ensure MPs and policymakers appreciate the skill and importance of what you do.
Ros Altmann is former pensions minister