Following the Autumn Statement announcement of a proposed reduction in the Money Purchase Annual Allowance (from £10,000 to £4,000), David Newman, Head of Pensions at Close Brothers Asset Management, says:
“Asides from the Chancellor planning to reduce the money purchase annual allowance to £4,000 from April 2017, it’s steady as he goes for pensions in the Chancellor’s Autumn Statement this year, and for good reason too. Leaving aside economic constraints on radical reforms or giveaways, savers need stability and security to fully get to grips with several years of seismic changes to the pensions landscape, especially with more changes to come in 2017 in the form of the launch of the Lifetime ISA. The announcement of the consultation to ban pensioner cold calling should provide welcome protection for consumers as they look to take advantage of the new freedoms, and should help engender greater confidence.
“This does not mean that the current pension system is fully fit for purpose for all savers however. A punitive lifetime allowance, for instance, ultimately deters long-term investment and is no longer simply a preserve of the super wealthy. Equally, the launch of the LISA adds another layer of complexity for those saving for retirement, as well as adding a new option. It is vital that it does not undermine the progress that auto-enrolment has made, or means that savers begin to forgo employer contributions to their retirement saving.
“There is clearly more that can be done to simplify and encourage pension saving, and we may see more changes in the Budget next year. But it is vital that any further reform is the product of long-term, considered planning, and implemented over sensible period of time, rather than an ad hoc, headline grabbing move.”