Rosalind Connor’s presentation and Q&A on the taxation changes to pensions in this year’s Finance Bill make for a good watch. As usual we’ve made the session available to those who couldn’t make it yesterday – and it was great to see so many on the call. As Rosalind told us after – there were some good questions. There were also good answers, though few could be definitive.
This is not a slam dunk, the Treasury is slowly revealing its hand after the shock and awe of the Budget announcement and the Finance Bill (sections 18-33) is being updated as it progresses through parliament.
Conor’s main thrust was that this piece of tax-reform was – unlike the annual allowance change – the Treasury taking an opportunity to ditch unpopular legislation which cost a lot to police and brought in little revenue. The AA changes look much more targeted at encouraging doctors and other high earners to stay in post.
But getting rid of the LTA is not as easy as the Chancellor’s swashbuckling statement implied. Conor explained that the Bill leaves options open as to what will be kept in next year’s legislation and how the LTA will be treated subsequently.
Here politics raises its ugly head as the Finance Act of 2024 will be the last of this current parliament, subsequent acts will be from a different Government , possibly with a pinker hue.
Much of the Q&A was taken up discussing the capacity of a future Government to retrospectively apply the LTA on people (typically clients of those on the call) who might have used the window created by the 2023 Finance Act – to make the best of easements while they last.
Conor’s view was that a future Labour Government would be unlikely to simply repeal the LTA legislation but use its perceived unfairness to reform pension taxation in a more general way.
The use of “fair” and “unfair”, formed a further part of the debate that followed Rosemary Conor’s slides. A question arose over who the cost to HMRC of abolition would fall to and it was put forcibly that it would fall on a younger generation who would not likely have the benefit of pots and pensions worth more than a million pounds.
This inter-generational argument is one I expect to be picked up by the IFS in its ongoing work on pension taxation and expect to hear more from Paul Johnson – and former IFS guru – Steve Webb on just who will pick up the tab.
I spent most of the call on a Santander Cycle as I navigated myself across London following an early morning meeting with the World Gold Council. It seemed grimly appropriate that my journey took me from St James Palace down Pall Mall, past the Inns of Court into the City. I finally parked my cycle by St Bartholomew’s Hospital – having covered most of the bases likely to be impacted by the changes in LTA.
My mind turned to the east – to Hackney, Stepney and Stratford, to Tottenham and Edmonton in the north, Brixton and Peckham to the South and to Hounslow and Uxbridge to the West. How many of the millions that live and work outside the City and West End of London will benefit from these changes.
Those on the call were there to serve the needs of the few, not the many. This debate, important as it is , is a debate in a small echo chamber. But – as the FT points out this week, the capacity of those with big pots and pensions to save again with fiscal impunity, makes this tax tweak disproportionally important.
Which is why we’ve got a lot to thank Rosalind Connor for. This blog and Pension PlayPen will continue to keep you updated, the LTA has not gone away, it is lurking in a most desultory fashion and so long as uncertainty persists, trustees and advisers need to be wary in delivering definitive advice and guidance to clients and members. Likewise the situation for those running non-workplace pensions, contract based workplace pensions and for those advising the pension wealthy is take care.
No doubt I should add – take financial and legal advice and ….
Very good piece about the need for advisers to tread carefully, when it comes to the LTA. The biggest issue is that clients want an answer and guidance on such a difficult topic.
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