Industry experts have united to condemn UK Chancellor Philip Hammond’s reported plans to slash pension tax relief for older workers as “misguided, short-sighted and counterproductive”, urging him to reconsider his plans.
In the customary leaks that come ahead of each annual Budget – this year’s is to be unveiled on November 22 – it has been widely rumoured that Hammond, pictured left, will reduce pension relief for older workers in order to fund cutting National Insurance Contributions for workers in their 20s and 30s.
DeVere chief executive Nigel Green said that if these rumours turn out to be true, it would be a “misguided measure” and a short-sighted strategy for raising revenue in a slowing economy.
‘Easy, low-hanging fruit to be plundered’
He added that, following the “less-than-desirable” outcome of the snap election this summer, the government will not wish to increase their unpopularity by going for VAT or income tax.
They can be expected, instead to go for pensions, he said, describing it as “attack on people’s retirement nest eggs” that demonstrates once again that the British government, which needs to bolster its coffers, views people’s retirement savings as “easy, low-hanging fruit to be plundered”.
Green’s cynicism over the government’s motives were echoed by other industry commentators.
Hargreaves Lansdown research director Mark Dampier said that the problem stems from MPs – “all of whom are on wonderful final salary pension schemes” – not having the first clue about how private pensions work.
Dampier pointed out that the young tend not to have any money, saying: “Most can only put money in as they get older, so cutting what you can save in later years is daft.”
Raiding pensions has become something of a ‘no-brainer’ for successive UK governments, said Green, pictured left, “as there’s plenty of funds within them, most of it belongs to the better-off section of society, and they get tax relief”.
This view was echoed by Dampier, who said: “There have been too many changes to pensions already, and now most older people don’t trust politicians.”
Green slammed the proposed policy change as “fundamentally flawed, short-sighted and counterproductive”.
He said that there was a “serious savings gap” but that the government seemed intent on “reducing one of the key drivers that motivates people to save for their future retirement”.
Chancellor needs to ‘go back to the drawing board’
He added that it would have a concomitant unintended consequence of discouraging a “much-needed revival” of a savings culture.
“Now more than ever, saving should be incentivised as retirement planning increasingly becomes a personal responsibility and as the country needs a financially secure older population for its long-term sustainable economic growth.”
Green urged older earners to act now in order to take advantage of the existing tax relief “while it lasts”, but urged the Chancellor to “go back to the drawing board and scrap this latest attack on pensions”.