The Association of British Insurers (ABI) has called for an end to the “salami-slicing approach” to cutting pensions tax relief and stated it is willing to work with the government on “longer-term reforms”.
The budget, which will be announced next Monday, 29 October, is again under close scrutiny after the Chancellor has given signs that pensions tax relief could be under threat.
Pensions tax-free allowance has been cut from £255,000 in 2010 to £40,000 as of last year, as well as a reduction to the lifetime allowance, which the ABI believes could again be the target.
"We must break the cycle of speculation, uncertainty and tinkering with pensions and tax relief that blights the UK pensions landscape,” ABI director of long-term savings and protection, Yvonne Braun, said.
“We recognise the Chancellor's need to raise revenue, but the salami-slicing approach to pension’s tax relief sends out the wrong message. Consistent changes risk undermining people’s confidence and trust in long-term savings at the very point where auto-enrolment is bringing millions more into savings and contributions are rising to 8 per cent next April.”
Braun added that the industry has seen “tumultuous changes” in recent years, and was in need for a period of stability after the introduction of freedom and choice and auto-enrolment.
“Rather than short-term chopping and changing, we would like to see meaningful discussion on sustainable long-term holistic reform in this area.
"We are willing to work with the government towards a pensions tax relief system that is fair, sustainable and does not undermine consumers’ confidence in long-term savings.”
Earlier this month, the government rejected calls from the Treasury Committee to fundamentally reform pensions tax relief after it said there was “no clear consensus” to do so.
Despite the government response to the Committee, Chancellor Philip Hammond said that pensions tax relief has become “eye-wateringly expensive”, according to a report in The Times.
In light of the budget rumours, Zurich has said that any slashing of the annual allowance would “unfairly impact Britain’s self-employed workers”.
According to its investment platform, contributions flowing in soared 98 per cent over September, while one-off contributions jumped 161 per cent from the 12-month average.
Zurich head of retail platform strategy, Alistair Wilson, said: “Savers are making the most of the higher pensions savings cap while they still can.
“There’s been a sharp increase in pension contributions since speculation began over a potential lower savings cap. Far from reducing the tax relief, the government’s continued tinkering with pensions is pushing the bill up.”
Wilson agreed with the ABI’s message that the government must deliver “confidence and stability” to pension savers.