He wants the MPAA pension investment cap of £4,000 a year - applied to those who have already accessed their pensions - to be lifted to at least £10,000 “if not abolished altogether.”
This would allow more people to top up and rebuild their damaged pensions.
Steve Webb, now a partner with pensions consultants LCP, warns that two groups will be particularly bady hit by the crisis:
- Those aged 55 or over who access their pension pots for emergency cash to tide them over;
- Those whose investments have fallen substantially in value in recent weeks as markets have tumbled, especially those already drawing on some of their pension
He predicts that both of these groups may be looking to rebuild their pensions but if they have taken taxable cash from a ‘pot of money’ or Defined Contribution pension then they are likely to be hit by the Money Purchase Annual Allowance limit on future pension contributions.
He said: “Many people will have seen the value of their pension savings tumble in recent weeks, and others may feel that they have no choice but to access their pension savings to tide them over short-term financial pressures.
“In both cases, pension savings could be severely dented. Once the present crisis is over some people will be in a position to start building up their pension again, especially if they are still in work. The government must support people in this rather than put barriers in place.
“The current £4,000 limit is far too low. If it cannot be abolished altogether it should at the very least be raised to the £10,000 figure from a few years ago. Rebuilding pension savings is going to be a challenge for many, so the government needs to show it is on people’s side, not standing in their way.”