AJ Bell cited a letter sent by Treasury financial secretary Jane Ellison on 2 March to AJ Bell chief executive Andy Bell, in which she responded to his call for an independent review of the pensions tax system.
Ellison said: “As you are aware, an extensive consultation was conducted last year which considered changes to the pensions tax framework. This concluded that now is not the right time to undertake significant reform.
“Given this, the government does not think it is necessary to convene an independent pensions commission at this time.”
This recent correspondence from the Treasury, AJ Bell said, showed that any cuts to higher rate tax relief on pensions in the near future would be “another huge U-turn in government policy”.
This is despite, Treasury sources in media reports saying that UK chancellor Philip Hammond has now put pensions “at the top of his list” to plug the black hole which has arisen from his national insurance contribution hike U-turn.
AJ Bell said that while the government “is intent on persevering with its cut to the Money Purchase Annual Allowance, these comments rule out any more fundamental reform such as a move to a flat rate of pension tax relief or a pension system more closely aligned to Individual Savings Accounts, which seemed to be the direction of travel under the previous government”.
“With the Budget moving to the Autumn, it now seems highly unlikely that there will be any discussion of significant pension changes until at least Autumn 2018. Furthermore, with the Brexit process likely to dominate government resources for the next two years this could easily extend into 2019 or, more likely, into the next parliament, given that government is unlikely to make radical changes in the lead up to a general election.”
Bell said that “hopefully the Treasury’s response to us gives people some comfort it will not subject pensions to more unnecessary uncertainty, at least during this parliament. If the government does turn its attention back to higher rate pensions tax relief, it will seriously undermine its credibility”.
