Tax relief announcement

In 2015, in an attempt to reduce the £21bn annual cost of personal tax relief, the then-chancellor George Osborne set his sights on up front pension tax relief for higher earners.

There were a number of options on the table, with the most controversial being to switch from the 'pension system' where you get tax relief up front, but pay tax on the way out, to an 'ISA system', where you pay tax up front but get the proceeds tax-free.

The consultation also looked at moving to a single flat rate tax relief system, making pensions unattractive to higher earners.

Earlier this month, David Gauke, the new Work and Pensions Secretary, ruled out any drastic changes to pensions tax relief. With a minority government and industry professionals disagreeing with the green paper, it may have been difficult to push this one through. The DUP have been campaigners for leaving the tax relief aspect of pensions alone.

Gauke spoke to the Financial times stating the government now had “an opportunity to think about long-term reform, and to try and build a consensus”, clearly not ruling out further changes to pensions down the track.

Hopefully, this means that, for now atleast, the government will stop tampering with pensions and inadvertantly causing more confusion, but some experts believe that the government is instead likely to turn its thoughts to the lifetime and annual allowance, which have recently been reduced to £1m and £40,000 respectively.

It's safe to say, we'll be watching this space.

Published on 18/07/2017