Why the government must stop the tinkering
The chancellor's first Autumn Statement tinkered further with pensions. Jonathan Stapleton explains why this is the wrong way to approach long-term savings.
On the pensions front at least, one can't help feeling the chancellor ended up tinkering in all the wrong places in his inaugural Autumn Statement last week.
While the industry should, perhaps, be grateful there was no move to abolish higher rate pensions tax relief or further amend annual or lifetime allowances, Philip Hammond did announce a consultation into reducing the money purchase annual allowance (MPAA) from £10,000 a year to £4,000 a year from April 2017.
But while the government is keen to prevent contribution 'recycling', reducing the MPAA could prove detrimental to those needing to access their pension money and will also add further complexity to the system as increasing numbers are caught by the limit.
The chancellor also restricted the tax-free benefits offered by salary sacrifice schemes.
While pensions were one of the few benefits excluded from this move, one can only feel that if HM Treasury wants to scrap National Insurance relief on pension contributions at a later date, this will provide a convenient template for doing it.
However, despite all this, there was no announcement on the abolition of the pension tax relief taper - a policy that many believe is totally unworkable, overly complex and sends out the wrong message on pensions.
And, while the chancellor warned the state pension triple lock could be cut in future due to rising longevity, he confirmed the government will keep the current arrangement in place until 2020 - despite growing fears the guarantee is unsustainable in the long term and should be scrapped or at least modified.
Chancellors need to realise that pensions are a long-term savings vehicle.
Unless we can reduce this constant tinkering - and move to a more sensible world where changes to the system are carried out no more often than once a parliament, preferably after long and considered review - then trust and confidence in this system will inevitably be eroded.
Jonathan Stapleton is editor-in-chief of Professional Pensions
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