Industry's reaction to Government response to household finances report
Trustees Agenda posted on 12 October, 2018
The pensions industry has reacted to the Government's response to the Treasury select committee's report 'Household finances: income, saving and debt.' The Government rejected the Committee's recommendation that pensions tax relief be reformed by removing the lifetime allowance and replacing it with a lower annual allowance, introducing a flat rate of tax relief and 'promoting understanding of tax relief as a bonus or additional contribution.' The Government also pointed out that it had previously consulted on reforming pension tax relief in 2015 and that no consensus for either incremental or more radical reform of pensions tax relief had emerged since that consultation. The Government also rejected the Committee's recommendation that the Lifetime ISA be abolished.
Experts in the pensions industry have taken the Government's response as indicative that the Budget is unlikely to contain any radical moves such as abolishing higher tax relief. The Government's approach has been welcomed as a pragmatic approach to tax relief as reform to pensions tax relief could have been a monumental gamble and undermined the fledgling savings culture being nurtured in the UK through auto-enrolment.