Nuclear Option for Pensions Tax Relief
The consultation “Strengthening the incentive to save” closed at the end of September and we expect an announcement from the Treasury during the Chancellor’s Autumn Statement announcements in late November.
Some are fearful that the changes will be the “Nuclear Option” whereby tax relief on pension contributions will be abolished altogether to be replaced by a type of savings labelled a Pensions ISA (PISA).
The PISA may or may not also have a tax incentive, perhaps in the form of a £1 bonus for every £2 saved.
Like with ISA savings the growth of the PISA may well be tax privileged (no capital gains tax and very little income tax on investments) and the benefits emerging will also be tax free.
The change however could be even more game changing with possibly no tax relief type bonus at all.
There will of course be the fear that a future government might overturn the non-taxable treatment of the emerging benefits.
It could be even more dramatic with a change to bring into line existing pension pots by allowing total access with a one off tax charge becoming payable.
Pensions have become a political football for successive governments and whatever the outcome of this review year are in for a further kicking.
The cynic in me wonders though about the title used for the consultation paper.
Is it really about strengthening the incentive to save or is it really about raising tax revenue to deal with austerity?