If the latest rules announced on 4 November 2021 go into legislation in 2022 as they stand, they will apply retrospectively from that date. This would mean many providers will need to go back to check transfers that took place from that date, to see if they are affected and if any corrective action is required. As the rules announced on 4 November took immediate effect (or rather, will have taken immediate effect, if they are implemented with no further amendments), there was no time for providers to prepare systems and processes to cater for them – either in terms of recording the appropriate information, or administering transferred funds in line with the new requirements.
In many cases the transfers won’t be affected and no further action will be required. However, advisers with clients who began a pension transfer from 4 November 2021 onwards can still expect to see correspondence this year as providers seek to gather further information – again, assuming there are no further surprise changes to come.
Tax relief
Unfortunately, it seems unlikely that we’ve seen the last of the seemingly endless debate around contribution tax relief. Tax relief reform has been predicted at every Budget for years, and we’ve all seen countless calculations about the potential effects of various possible reforms on different groups of savers.
However, it’s hard not to wonder how long pensions can escape with no major tax changes after the pandemic, and changing contribution tax relief would seem to be an area where significant savings could potentially be made. It also wouldn’t be a completely unexpected change, given that people have been speculating about it for years.
Of course, one of the reasons tax relief reform has been so widely discussed is the difficulty agreeing what the reforms would look like and how they would be implemented. If everyone can agree that the new system should encourage people to save for retirement, there’s little agreement about what would, in practice, encourage people to save. Similarly, there’s agreement that the new system should be fair, but very little consensus about what ‘fair’ looks like. Implementing any of the types of reforms that have been proposed so far is an even more difficult subject.
Despite this potential complexity, I wouldn’t be entirely surprised if any tax relief reform also came hand-in-hand with other changes – for example, to the annual and lifetime allowances, which have themselves become horribly complex over the last few years. If the pension freedoms revolutionised how people access their pension savings at retirement, perhaps next we will see a raft of reforms aimed at transforming the way people save to begin with.
This is just an introduction to three pension topics to watch out for in 2022 – we believe there will be many more in depth discussions about all of them throughout the year, as further information becomes available and the implications for customers, advisers, and providers become clearer.
