With pre-Budget speculation over potential changes to pensions tax at fever pitch, Aegon is calling for cool heads and for the Chancellor to resist a damaging pension cash grab.
Steven Cameron, Pensions Director at Aegon, said:
“As the first Budget under the new Labour Government fast approaches, the speculation over changes to how pensions are treated for tax purposes has reached boiling point. Most worryingly, the fear that some tax perks might be withdrawn immediately following the Budget is causing some individuals to rush into decisions that may be damaging to their long-term retirement plans.
“Now is a time for cool heads, not heat of the moment decisions that could have a negative impact for decades to come. The government is about to launch the second phase of its Pensions Review which provides an ideal opportunity to re-examine the true purpose of pensions and then to ensure tax rules and reliefs support this.
“Savings in individual or workplace pensions represent some of the longest-term investments people make. This often involves locking away savings for many decades and it’s right that people benefit from tax incentives in return for deferring earnings today to make themselves more self-sufficient in retirement. This is not only good for individuals but for society generally, avoiding over-reliance on an unfunded state pension in later life. The government is also keen that investments held by pension schemes are put to use in boosting the UK economy.
“Against this backdrop, it surely can’t be right that rumour upon rumour is leading to some individuals cashing in their pensions, quite possibly needlessly, before the Chancellor stands up to give her inaugural Budget speech. Surely that’s not what the Chancellor would wish to see happen.
“While no Chancellor will ever reveal exactly what will emerge from the red Budget box, it would be extremely helpful if all governments committed to some prudent principles when setting pensions tax policy. Cross-party support here would go a long way to help people plan ahead with confidence, across decades and changing parties in Government, for a comfortable retirement.”
Aegon recommends the following pensions tax principles to underpin a cohesive retirement savings environment.
- Offer fair incentives to individuals across earnings bands
- Apply these consistently across defined contribution and defined benefit schemes in the private and public sectors
- Encourage employers to go beyond the minimum ‘auto-enrolment’ requirements and offer more generous pension contributions
- Prompt adequate personal saving levels by offering clear, timely and stable incentives
