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General election 2017 and pension tax relief

General election 2017 and pension tax relief

pension-blog

It’s a truth universally acknowledged, that a Chancellor with a hole in his fiscal plans must be thinking of a raid on pension tax relief.

After the u-turn on national insurance contribution rises for the self-employed, speculation mounted that the Chancellor might look to further changes to pension tax relief to make up the £2 billion he would no longer get from increasing Class 4 NICs as announced in the Budget.

Steve Webb, the former pension minister (and current director of policy at Royal London) immediately speculated about cuts to pension tax relief.

That weekend the Sunday Times reported (paywall) that pension tax relief was at the top of the list of targets for the Chancellor.

While the Telegraph subsequently reported that a pension tax raid was off the cards it was later clarified that this was based on correspondence from a Treasury minister sent before both the Budget and the u-turn on Class 4 NICs.

When pressed by the Financial Times about their plans the Treasury refused to rule out cuts to pension tax relief.

There were clear signs that this government was seriously thinking about significant cuts to pension tax relief even before the general election was called.

This was despite the fact that Treasury concluded that it was "not the right time" to consider reform to pension tax relief only a year ago.

Even more fundamentally, the Conservative party made a very clear statement about pension tax relief going into the 2015 general election:

“We believe that the pensions tax relief system will be fair and affordable and we will not propose any further changes to the system during the next parliament.”

Going back on a clear statement like that in order to fill the fiscal hole caused by a u-turn required in order not to break a different clear commitment (on no NIC rises) would have been problematical.

But now that we are likely to have a new general election on 8 June, the commitment on pension tax relief will soon be out of date and all bets will be off.

All political parties will have to be pressed on their plans for pension tax relief, but it is the kind of technical detail that it is possible to be quite vague about while still planning fundamental changes (nothing at all was said about the major consultation on pension tax relief announced in the summer Budget in 2015 in the preceding general election).

Prospect will dissect what manifestos and other sources of information have to say about pension tax relief in due course.

Other pension issues (particularly whether to keep the “triple lock” on state pensions) are likely to be higher profile than potential changes to pension tax relief and I will write about these shortly. 

Neil Walsh

Neil Walsh


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