Three experts ask if pensions tax relief is still at risk


“Although pension tax relief is complex and deeply flawed, many people would breathe a sigh of relief if we could go a whole year without any tinkering. Pensions are supposed to be a long-term business, and the constant changes we have seen are making it increasingly difficult for people to plan. However, a cash-strapped government is going to find it hard to have two Budgets in 2017 and not look hard at pension tax relief. Sadly, the most likely outcome is more tinkering, with a cut to the annual allowance probably the frontrunner, no doubt justified by the big increases to ISA allowances in recent years.” Steve Webb, director of policy, Royal London

“Predicting pension tax relief changes is tough. It is a big-ticket item for the Treasury. Relief is skewed towards the higher paid, while the Treasury looks longingly at the tax-free cash concession, wanting at least to restrict it. However, people need to save more for retirement, and despite poor understanding of tax relief, any tax increase proposal is emotive. This year the money purchase annual allowance is likely to be reduced to £4,000, and the less tax-efficient Lifetime ISA which will tempt money away from pensions is to come on stream. My hunch is no other changes this year; however, the issue is not going away.” Kevin Le Grand, president, PMI

“The potential for change was, of course, floated over the past year with a variety of options. For example, moving to a flat-rate tax relief that would smooth out the differences between higher rate and basic rate taxpayers through to a TEE (taxed, exempt, exempt) model where instead of your pension being taxed as part of your income (as now) there would be no tax relief as you paid into your pension, but you would not pay tax when you took your pension as income. The big issue is about making saving for retirement easy to do – to make active saving for retirement a social norm.” Melinda Riley head of policy, technical and advocacy, TPAS