Written by Steven Cameron, Pensions Director at Aegon
The Chancellor has a particularly challenging Budget to deliver this week, to ensure the UK returns to a position of financial soundness, offering stability and confidence to international markets and future generations.
And he’s made it clear that we’ll all need to pay more in taxes. Against this backdrop, we’d call on the Chancellor to continue to offer appropriate incentives to individuals who want to get their personal finances on a long term sound footing, including the millions who are investing or saving in pensions.
As well as providing for themselves, those contributing to private and workplace pensions are reducing their reliance on the state to fund their future retirement. This should be welcomed as tomorrow’s state pensions aren’t paid for out of some huge fund built up in the past, but from the National Insurance contributions of tomorrow’s workers. Current economic challenges are highlighting just how costly the state pension triple lock is, particularly in volatile conditions when price inflation and earnings growth are unpredictable. But failing to honour the triple lock next April doesn’t sit well with protecting the many vulnerable individuals heavily reliant on the state pension.
There’s little doubt that Chancellor Hunt, like many Chancellors before him, may be tempted to collect more in taxes by reducing the tax relief available on pensions. There may well be merit in spreading the tax relief granted more equitably across those on different income levels. But we urge care in rushing into complex reforms today which could have damaging consequences longer term such as putting people off saving.
At times like these when the squeeze is being felt by almost everyone, offering incentives to put aside some of today’s scarce income to boost individuals’ future financial stability may be needed more than ever.
