By Matt Ritchie
The government’s decision to resist significant changes to tax relief on pension contributions ran contrary to much of the speculation which preceded the announcement, and has earned praise from many industry commentators.
Among them, Rowanmoor Pensions managing director Ian Hammond said “all in all” the budget had been good news for the pensions industry and would help re-establish people’s faith in pensions.
“There was much recent speculation the Chancellor would announce changes limiting the tax incentives of long term pensions savings in his 2012 Budget.
“Whilst the Chancellor is obviously a man under pressure to raise the government’s pot of available cash, he has realised that the future retirement health of the population cannot be put at risk any further and rather than being put off investing in pensions, people need to be encouraged to do so. Mr Osborne has shown he doesn’t want to risk rocking the pensions boat any further,” Hammond said.
Society of Pension Consultants president Kevin LeGrand said the government had "seen sense" in resisting making any significant changes to pensions tax relief. Many would breathe a sigh of relief at the maintenance of the status quo, he said.
“[The] announcement helps put an end, at least for the moment, to the recent damaging uncertainty kicked off by the Treasury, that has abounded at a time when government policies to encourage pension savings are still in the process of being formulated. The government must be aware of the acute sensitivities surrounding pensions and must focus on encouraging pension saving rather than giving potential pension savers the jitters.”
It was great that pensions had been “left alone”, according to PwC partner and head of pensions group Raj Mody.
“Even speculation about changes in the run-up to the budget was undermining confidence in pensions saving, causing some individuals to make snap judgments about their retirement plans. What we really need to see is a stronger commitment from government to a long-term stable framework for pensions tax, possibly supervised by an independent Commission, so pensions aren't always subject to short-term political interference.”
The Tax Incentivised Savings Association’s director of policy Malcolm Small said the budget was good news for pensions on several fronts, one of which being the absence of tinkering with tax relief on pensions.
“Tax relief on pension contributions was left unaltered, when many feared it would be limited further. This is welcome; we need as few changes as possible in pensions ahead of the automatic enrolment initiative starting later this year,” Small said.