It was slim pickings with respect to announcements concerning the Pensions Industry. Today the Chancellor outlined:
• a drop in the Money Purchase Annual Allowance from £10k to £4k, for those who have availed themselves of the April 2015 pension freedoms
• tightening up of Master Trust regulation
• a 25% tax charge for QROPS transfers in certain scenarios
The first two of these were telegraphed in one way or another last year and the last won’t apply to all transfers so, in actual fact, there wasn’t much said.
There had been some chatter, as there was prior to the 2016 Autumn Statement, that the Government would once again dip their hands into the Cookie Jar and generate tax revenue by cutting pensions tax relief further. This didn’t transpire and, judging by the windfall from the 2015 pension freedoms, it was a pleasant surprise that the Chancellor didn’t look harder in that direction.
With regard to the tax revenue generated by those 2015 freedoms, the pensions press today reported that this has been almost 3 times more than what was projected over the last two tax years. This is obviously good news for the HMRC, but is it a cause for concern? Are members getting the right advice? Will cash hungry pensioners be living out of their ‘Lambos’ in the near future!?
Australians have had access to pension freedoms for the past 30 years and recent experience shows around 20% of people retiring at 65 run out of money by age 70 and 40% by age 75. The Australian government are now planning to introduce changes to taxation to encourage citizens to use their pension savings to provide a steady income for life.
Our View: We are concerned with the rate of cash withdrawals and wonder where this short-termism will leave UK pensioners in 30 years? Any further tax changes must be for the long term good of sensible retirement patterns; rather than the gratification of headline grabbing politicians.