George Osborne launched a consultation into the future of the pensions tax regime in July and speaking to the House of Commons yesterday, he appeared to suggest the Government’s final response to its consultation would be delayed.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said if no significant changes were afoot then the Treasury would have issued a quick conclusion to the review.
Richard Graham MP, Conservative, said: “Tax relief on contributions to pensions is expensive and favours higher-rate taxpayers much more than others. Does my right honourable friend agree that that is an area in which sensible reform could be considered, in order to help to balance the budget without disincentivising saving?”
Mr Osborne replied: “My honourable friend … is an expert in these matters, and he will know that we are open to consultation on the pensions taxation system at the moment. It is a completely open consultation and a genuine Green Paper, and we are receiving a lot of interesting suggestions on potential reform. We will respond to that consultation fully in the Budget.”
Mr McPhail said: “A quick response would have meant no change. The fact that they want more time to work on it suggests they are still pursuing fundamental reforms. I believe these are likely to lead to cuts in the tax breaks offered to higher earners.”
He said higher earners should “seize this opportunity to maximise your pension funding while you can still benefit from these tax breaks”, saying he believes they “won’t be around for much longer.”
The delay also reflected the complexity of the system and the challenge in introducing any reforms, he said, adding that his company welcomes the “measured approach rather than rushing at the problem”.