George now travels by train (thanks Sophie)
The Government’s plans to resolve the injustices of the Pension Tax Relief system appear to have been ditched. Announced in the budget of 2015, expected in that year’s autumn statement and postponed in the months running up to this year’s budge, they now appear a casualty of BREXIT.
For those who don’t remember, they were officially postponed because of the market uncertainty we saw at the beginning of the year. The market is now back to record levels but there is no talk of reigniting the radical reform being worked on by the Treasury.
Of course the real reason that tax-relief was ducked, was to give the Remain campaign a clear run. Of the many thins for Osborne and Cameron to regret, shelving good policy for political expediency will be an after thought. You always got the impression that under Osborne, pensions was a political football to kick around the yard. The kids are out of the yard now- BAU means more unfairness.
The football’s back in the cupboard.
The Government is pressing ahead with its plans for a Lifetime ISA, though the enthusiasm seems thin. Yesterday – at last – we got the detailed regulations for this product, so asset managers and insurers can get on with building the thing.
It’s a bit of an unwelcome smell for those of us who are getting on with implementing the main event- auto-enrolment. I am not in the DWP Select Committee/Ros Altmann camp of seeing the Lifetime ISA doing a lot of harm.I just with that Treasury time was put to better use.
We have terrible anomalies in our pension tax system.
- People who are due tax relief (or Government Incentive if we have to call it that) AREN’T GETTING IT
- Some people who have saved all their lives now find themselves paying penal taxation rates on income in retirement of over £35,000
- Meanwhile, people can have pensions five times that and pay less tax.
The blog’s not long enough to fully explain, but in synopsis; we are denying thousands of people auto-enrolled and choosing to be in occupational pension schemes (that operate under net-pay) even basic rate tax relief.
Meanwhile, those still in defined benefit pension schemes are protected to the point that pensions apartheid becomes more vivid and real every day.
The taxation system that governs pensions is fundamentally flawed so that the pension wealthy get away with blue murder while the pension poor remain so.
There was a need for tax reform- that need has not gone away.
We may have a downgraded pension minister, the Treasury may have the keys to the political football cupboard, reform may be postponed to meet the new agenda.
But the people who are pensions poor will remain pension poor and those who are wealthy will just get wealthier.
The Lifetime ISA is a confusing irrelevance.
Without Altmann in Government, there is no-one saying these things, but these things need to be said.