The pensions industry can breathe a sigh of relief after the Spring Budget passed by with very little change to concern it.
The only mentions of pensions (and some of these were in the accompanying briefing papers rather than the speech itself) were:
- A 25% charge on transfers to overseas pension plans (QROPS) effective immediately (exceptions will apply),
- Confirmation of the reduction in the money purchase annual allowance to £4,000 from 6 April 2017 (previously announced in the Autumn Statement),
- The tax registration process for master trusts will be amended so it is aligned with the Pensions Regulator’s authorisation process.
The Budget is perhaps most notable for what it did not include. Thankfully the Chancellor avoided a potential pensions and social care banana skin. It was widely trailed that extra investment would be found for social care and also that there could be further reductions in the tax relief available for pension saving. It is pleasing that Mr Hammond proceeded with the former and not the latter. To have moved forward with both polices would have been logically flawed. Encouraging workers to save into pensions, is about giving them financial independence and security in retirement. Someone with a decent pension is best placed to self-finance any social care needs that they may have in later life. Discouraging pension saving would have resulted in more individuals becoming more reliant on the state during retirement which would in turn have increased the government’s social care bill.
It is reassuring that, at least for now, pension tax relief is largely untouched. However, many pundits suggest that the Chancellor sees this as having been an interim Budget and he is holding back the big changes for the first of his Autumn Budgets later this year.