The government has confirmed it is reinstating a planned cut to the Money Purchase Annual Allowance from £10,000 to £4,000.

As part of an announcement on the digitisation of tax by Treasury Minister Mel Stride, the government confirmed a Finance Bill will be introduced as soon as possible before the summer recess.

“This will legislate for all policies that were included in the pre-election Finance Bill, raising over £16bn across the next five years to fund our vital public services. The government has also re-confirmed that all policies originally announced to start from April 2017 will be effective from that date,” the announcement said.

In addition, a statement from the Treasury said: “The Finance Bill introduced in March 2017 provided for a number of changes to tax legislation that were withdrawn from the Bill after the calling of the general election. The then-Financial Secretary to the Treasury confirmed at the point they were withdrawn that there was no policy change and that these provisions would be legislated for at the first opportunity in the new parliament.”

Royal London director of policy Steve Webb condemned the announcement: “It would be outrageous for parliament to be debating in September and October what tax allowances will be from 6th April 2017. Cutting the MPAA is an unnecessary measure in the first place, but it is particularly unacceptable to do so with retrospective effect.

“How were savers meant to know in May who was going to win the Election? This is an arrogant announcement based on the assumption that the DUP will vote with the government on tax measures and so any tax change can be got through the House of Commons. With tax measures not debated in the House of Lords, this gives the government a free hand on tax which is not good for proper scrutiny of detailed changes such as this. The MPAA cut, if it has to be implemented at all, should be delayed until April 2018”.

In addition, AJ Bell senior analyst Tom Selby said: “Today’s news will come as a bitter blow to thousands of retirees who have used the pension freedoms to access some of their retirement pot from age 55. Many had hoped the general election would put a legal spanner in the works and force policymakers to, at the very least, delay reducing the MPAA until April 2018. These hopes have now been dashed by the government.

“We do at least have clarity on what the MPAA is for 2017/18, which means advisers and individuals can plan with a degree of certainty. But the reality is the UK pension tax regime is a mess, bedevilled by complexity and confusing even to seasoned industry experts. Rather than continuing to tinker with a broken system, the Government should carry out a root and branch review aimed at simplifying the rules and encouraging more people to save for retirement.”

Share Story: