The recent scrapping of pension tax relief and further cuts to the Lifetime Allowance and Annual Allowance are weighing heavily on advisers’ minds, according to research from FundsNetwork.
A cross-section of advisers using Fidelity’s FundsNetwork platform were surveyed on what issues concern them the most, over the next nine months until the end of the year, with respondents pointing to a major reform of pension tax relief (47%) as a major concern.
While HM Treasury has made efforts to assure the industry that major reform is apparently not on its agenda in the near future, advisers are still worried about “ever-moving goalposts and further “tinkering” with the existing pensions system, FundsNetwork pointed in its statement.
In particular, further modifications to the Lifetime Allowance and Annual Allowance are seen as a threat with 43% and 40% of respondents respectively citing these as concerns.
The Money Purchase Annual Allowance (MPAA) came much lower in the list of concerns at just under a quarter (23%) of advisers listing this as an issue. This may reflect the fact that at £4,000 per annum there’s not much more the government can do here short of removing tax relief altogether for those who’ve accessed their pension flexibly, FundsNetwork said.
But the biggest concern for advisers in 2017 is unforeseen legislation changes with two thirds (66%) of advisers worried about what other surprises may be sprung on the industry, with the out-of-the-blue change to the offshore pension QROPs legislation, as reported, seen as a potential trigger of such worries.
Richard Parkin, head of Pensions Policy at Fidelity International, said: “Some say it was a quiet Budget for pensions but let’s not forget it included some surprise changes to overseas pension transfers as well as confirmation of the MPAA reduction despite no real evidence of abuse and almost unanimous industry opposition.
“HM Treasury has ruled out any major reform of pensions’ tax relief although that was before the U-turn on self-employed National Insurance. This has left a hole in the Chancellor’s sums that will need filling somehow. Pension tax relief has proven time and time again to be an easy target so it’s not surprising that advisers see the Annual and Lifetime Allowances as being at risk again.
“But it’s the fear of the unknown that is the biggest worry for advisers. This government has got a reputation for springing surprises on the pensions industry. While we have been promised a more thoughtful approach to legislation from the new leadership it seems advisers have yet to be convinced.”
The research was conducted among 222 FundsNetwork advisers in March.
FundsNetwork is Fidelity International’s investment services platform that provides advisers and their clients with access to a range of investment wrappers and over 2950 funds from more than 130 providers.