The July Budget has been met with a mixed response after the Chancellor George Osbourne announced a range of measures that will impact the pensions industry.
Measures in the budget include a Green paper with proposals for 'radical change' to the pension saving system, a reduction in the amount higher earners can contribute to their pension tax free, and a wider review of pension taxation.
The National Association of Pension Funds (NAPF) welcomed the suggestion of a pensions tax review.
NAPF chief executive Joanne Segars said: "We are pleased the government has chosen not to rush into wider reforms or jump to conclusions about what will work best as a reform, such as taxing pensions in the same way as ISAs, and a wider review of pensions tax is welcome news.'
John Broome Saunders, actuarial director at Broadstone, said the Green paper was an indication that the chancellor had taken on board the opinions of those who felt his previous reforms were not well-considered.
He said: "The chancellor has clearly taken heed of previous criticism that some of his earlier pensions reforms, such as removing the requirement to buy an annuity, were implemented to hastily – instead, the Green paper asks an open-ended question, what should we do about pensions?"
Response to the proposal to reduce the tax-free amount people can pay into their pensions for those earning more than GBP 150,000 has been less positive, however.
The NAPF, along with several pension funds and financial institutions, has expressed disappointment at the proposal, which they say will create instability in the future.
Joanne Segars said: "It is deeply disappointing to see politicians once again syphoning cash from tomorrow's pensions to pay the bill for today's political priorities.
"Ensuring a decent deal for today's savers and tomorrow's pensioners will only come from a stable pension system on which people can depend upon not to change overnight, and tinkering with the tax treatment of pensions from one Budget to the next does nothing to build confidence in them."
The latest announcement on changes to pension industry comes hot on the heels of this year's pension reforms.
While some further reform is necessary, alternative suggestions on how this can be achieved have been made.
Morten Nilsson, CEO of NOW: Pensions said pensions no longer exist to "provide an income for life in retirement" which makes tax relief inevitable, but he believes it is a questionable incentive.
He said: "While the government is right to consider how it makes pension saving a more compelling proposition for young people, it is questionable whether changes to tax relief would act as an incentive.
"To safeguard the long term success of auto enrolment, adequacy of contributions needs to be urgently addressed, while over the long term serious consideration needs to be given to auto escalation, in the first instance, contributions could be materially improved by removing qualifying earnings," he said.
First published 09.07.2015
Lindsay.sharman@wilmingtonplc.com
