The shadow pensions minister has called for chancellor John Healey to rule out further tax changes affecting the pensions system from his forthcoming Budget speech.
Healey will give his first Budget speech as chancellor later this month, and speculation has already begun about potential pension policies after changes to salary sacrifice announced last year.
However, Helen Whately, Conservative MP and shadow pensions minister, used her appearance at the Pensions UK Annual Conference to urge the chancellor to confirm no further tax changes and give the industry and pension savers certainty.
Whately said: “People plan for retirement over decades, so when governments mess around with incentives because a chancellor is struggling to balance books, in the short term, people are anxious or furious. In the long term, our pension system is undermined.
“Think about someone approaching retirement. They hear a rumour about a tax change. They wonder whether to take money out sooner than they planned, whether to stop contributing, whether to retire now before the rules change again.
“The change may never happen, but the decision they make in anticipation can affect the rest of their life… The damage can be done before the chancellor even stands up on Budget day.”
The Budget will be “an important test” of prime minister Andy Burnham’s leadership, Whately said, amid growing pressure on the government’s finances.
However, she stated that the Conservative Party opposed any further tax increases affecting pension schemes or pension savings, and called for the government to rule these changes out “now, not on Budget day after weeks of speculation”.
“Confidence takes years to build, but so little time to lose,” Whately added.
Last year, in the weeks ahead of the Budget, several surveys found that people were taking action with their retirement savings amid concerns about future tax changes.
A survey of Pension UK’s members conducted prior to last year’s Budget found just over nine out of 10 (91%) were concerned about potential pension tax changes. Almost all respondents also agreed that leaks and rumours were damaging confidence in pension saving (97%), and 87% said the speculation reflected a lack of long-term policy stability.
David Brooks, head of policy at Broadstone, urged savers not to make decisions based on speculation and rumour.
“Taking pension benefits early, withdrawing tax-free cash, or fundamentally changing a retirement strategy should be based on an individual’s long-term circumstances rather than second-guessing what rabbit the chancellor may pull from his red box.”
“The annual Budget guessing game has become a fixture of the pensions world,” Brooks said. “Every year we hear rumours that tax-free cash is about to be scrapped, cut or capped and, as a consequence, we learn of people making irreversible decisions with their pension.
“Our message to pension savers is simple: do not make a permanent financial decision because of a temporary headline. Taking pension benefits early, withdrawing tax-free cash, or fundamentally changing a retirement strategy should be based on an individual’s long-term circumstances rather than second-guessing what rabbit the chancellor may pull from his red box.
“The reality is that none of us knows what the chancellor will announce. Rather than focusing on rumour and speculation, savers would be better served making sure they understand the changes that are already coming and reviewing their plans accordingly.”
John Healey will deliver his Budget speech on 28 October.
