More than 80% of advisers support reform of the money purchase annual allowance (MPAA) in response to covid-19, a survey conducted by AJ Bell has revealed.
The majority (40%) want the MPAA scrapped altogether, and almost a third (30%) want the MPAA increased from £4,000 back to £10,000, while 9% support temporarily not applying the annual allowance cut during the current crisis.
UK workers can currently contribute up to £40,000 a year or the equivalent of their annual salary, and receive a tax allowance on this.
While there are various easements to the MPAA the government could consider to help hard-pressed savers, the simplest would be to scrap it altogether."
Tom Selby, senior analyst at AJ Bell, commented: "Even before covid-19 hit, the MPAA felt like an unfair punishment for savers whose only crime was accessing taxable income from their pension pot."
"During this crisis many more over 55s will be facing salary cuts or joblessness, while others will need to use their savings to help loved ones struggling to make ends meet. In such an environment, hitting people with a 90% annual allowance cut for taking even £1 of taxable income from their pension feels deeply unjust."
Selby added: "While there are various easements to the MPAA the government could consider to help hard-pressed savers, the simplest would be to scrap it altogether."
"This could then mark the beginning of a radical pensions reform agenda, with the aim of simplifying the unnecessarily complex tax rules savers have to navigate and encouraging more people to save for their financial future."