Is the Govt about to reinvent the wheel on pensions?
Advisers are being warned to brace themselves for another year of disruptive pensions policy which could see the idea of long-term savings turned on its head.
Reform of pension tax relief is thought to be “almost inevitable” as the Government looks for substantial cost savings against the backdrop of Brexit negotiations and the potential impact on the UK’s growth prospects.
The influence of former chancellor George Osborne will continue to be felt on pensions with the roll-out of the Lifetime ISA, as the pensions industry reiterates its concerns about the threat this product poses to traditional pension saving.
There are also major challenges to tackle on the scope of auto-enrollment, and addressing the growing need to widen access to retirement advice.
Hargreaves Lansdown head of retirement policy Tom McPhail says: “It’s going to be a pretty uncertain year. It’s a case of the unknown unknowns: first there is the destabilising factor of Brexit, and the extent to which that will dominate the Government’s agenda. Then you’ve got Mifid II, the Financial Advice Market Review and the asset management market study.
“These are all big pieces of work, any of which could significantly disrupt companies’ business models. They have the potential to be a force for good, but they are disruptors as well and you have to be mindful of how they could change things.”
Twice the opportunity
Changing the way pensions are taxed has long been on the political agenda, and providers and commentators are expecting the issue to gain momentum in 2017.
McPhail says: “It is almost inevitable the Treasury is going to revisit pension taxation. There’s a high probability this will happen this year. We have got two Budgets, we’re going to be in the teeth of Brexit, and we know the Treasury has got unfinished business there. It’s more likely there will be change than not.”
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