Restrict pension tax-free cash
“Another rumour that often does the rounds is that the Treasury is planning to either remove or restrict the ability of savers to take a quarter of their retirement pot tax-free.
“While the Treasury has seriously explored radical tax relief reform, it is telling that tax-free cash has never been looked at in the same way.
“This is likely in part because any move to cap or abolish tax-free cash altogether would be extremely unpopular, and in part because it would almost certainly involve creating a protection regime, so pension contributions already made continue to benefit from their existing tax-free cash entitlement.
“This would deliver an unwelcome double for the Chancellor of unpopularity and complexity. What’s more, any savings to the Exchequer would potentially take years to materialise.”
Death taxes
“If the Chancellor wants to raise money from wealthier people, he could turn his attention to taxes paid on death.
“Pensions can currently be passed on tax-free on death if the person dies before age 75, and at your recipient’s marginal rate of income tax if you die after age 75.
“Applying a tax to inherited pensions would clearly raise much-needed cash for the Treasury, although how much would depend on whether a protection regime was introduced for existing funds or not.
“If it wasn’t, those who have paid into pension on the basis of the death benefits on offer would understandably feel angry at the rug being pulled from under them.
“Inheritance tax is the other lever the Treasury could pull here, either by reducing the headline rate or lowering the amount that can be inherited tax-free.
“Both measures would inevitably lead to ‘death tax’ headlines, however – not something politicians hoping for re-election would generally welcome.”
Automatic enrolment update
“There are various areas of the flagship auto-enrolment reforms that are currently up in the air and the Chancellor may use his Autumn Statement to provide an update.
“Top of the list is arguably the ‘net pay’ issue which means well over 1 million low paid workers are estimated to be missing out on pension tax relief each year. The Conservatives pledged to address this in their manifesto, so a solution should be forthcoming sooner rather than later.
“The Government has also committed to expanding auto-enrolment in the ‘mid-2020s’ by reducing the qualifying age from 22 to 18 and scrapping the ‘earnings band’ against which minimum contributions are calculated. If taken forward, this would mean every pound earned would qualify for a matched contribution from your employer.
“This would represent a significant boost to people’s workplace pensions but would also hike costs for employers. Given the stresses many firms are under, policymakers might be reticent about pushing ahead with this change right now.”
