Ros Altmann

Altmann makes “£70m pension give away” matter

No one has such capacity to wind up the pension community as Ros Altmann and my blog that supported her outrageous demand that tax-relief be granted to pension funds so long as those pensions invested for the good of the Treasury has collected scorn on Ros and probably me, for the suggestion. You can read the comments below the blog

Ironically a Tory Baroness is calling on a Labour Chancellor to intervene in pension investment with a fiscal measure. Isn’t this the moan of Tory politicians over the ages?

Tax relief is rarely regarded as a matter for fiduciaries who have responsibility for pensions to meet expectations. It was a Labour Chancellor, Gordon Brown, who last clipped their wings and there has been a suspicion ever since that Labour would like to tax pension investment to pay HMT’s bills.

Tax-relief should be earned not received by right

Of course this is bound up in a view is that the tax system is a means of robbing and robbing the rich, it is not considered a means of incentivising good behaviour (as Altmann argues it should be).

One of the features of Hymans Robertson’s “untapping” pensions tax proposals is that tax is used to boost investments so that people get better pensions when they are paid , more invested than an ISA and the TEE system works for those on low incomes rather better than it does at the moment.

Relief at source sees tax-incentivisation that is much fairer.

The last time we had a really progressive tax measure on pensions was by a Tory Government in 1988. That was the introduction of Relief at Source for personal pensions. It meant that everyone , including non tax-payers such as children and those paid by unearned income could get a tax incentive on their personal and later stakeholder pensions.

But it has since auto-enrolment’s arrival become the means that low earners (who contribute to workplace pensions but pay no tax) get an incentive from HMRC. They get the equivalent of basic rate tax relief paid into their pension pots and this has worked for big schemes like People’s Pensions, Nest and insured GPPS and even non-insured SIPPS.

You don’t get the incentive if you are in a net-pay pension and that goes for all DB pensions still open (including the unfunded schemes like the NHS, civil service and teachers). The low income payers will have to wait for some restitution for being cut out of the relief at source payments into low-income payers pensions.

The people who are most alarmed by Ros Altmann’s proposals and to a lesser degree Hymans’ proposals are worried that it is a tax on pension benefits for schemes that do not behave investment-wise, in a nationalistic way. Put simply, if you don’t invest into the UK you will, under Altmann, be granted less tax relief and that will hurt the rich hardest and the poorest will not notice (because they don’t see tax-relief happening).

The unions and Reform should pick on a tax system that works for everyone

This could have come from the unions and should be promoted by them to remind those who own the pension industry (mainly insurers these days) that pensions are for the British people. I would like to think that Nigel Farage will cotton on to the principle at work !

The transparency of her approach to tax is refreshing and extremely provocative. I fear that she will have aggravated many of my business partners and clients as I will if they read this blog. But we really do need to think again about what tax is supposed to do and like Ros , I think it should be granted where the tax-payer gets value for money.

What we are doing with pension money is investing in the kind of assets which are good for bulk annuities (DB investment) and wealth management and individual annuities – DC “pensions”.

If Torsten Bell and Rachel Reeves want to make pension schemes improve decumulation and  run on, then they should consider using fiscal measures to encourage good behaviour.