The pension raid that is expected by Chancellor Philip Hammond in the Budget this November has been criticised by the head of one the world’s largest independent financial advisory organisations.
Nigel Green, founder and CEO of deVere Group, argued that the move would damage the UK’s saving culture when the practice is necessary for the future economy.
“If Mr Hammond does announce this measure, it would be another hammer blow for those who have worked hard to get ahead in life through prudently saving for their future,” said Green.
“Continually raiding pensions tax relief is helping to undermine a culture of saving at time when it has never been more necessary to promote it.
“We’re all living longer, meaning savings need to last longer, debt levels are high, care and health costs are climbing, and financial security is ever-more a personal responsibility.”
Pension raid expected in November Budget
While Philip Hammond has made no official announcement of a pension raid, an unnamed senior government source told the Daily Mail that pension tax relief, worth £38bn, was being regarded by the Chancellor as “one of the last remaining pots we can raid”.
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Green believes the pension raid is therefore very likely to feature in the upcoming November Budget.
“It is almost inevitable that pension tax relief will be a target as the government looks to plug gaps in November’s Budget,” he said.
“The Chancellor has huge funding gaps to fill in public services and it can be expected that pensions will again be attacked to bolster government coffers.”
With so many government departments and initiatives having faced significant cuts in recent years, a pension raid may be one of the few options left for a government looking for simple ways to cut costs.
“Such a raid on people’s hard-earned retirement nest eggs would highlight once more that successive British governments consider people’s retirement savings as easy, low-hanging fruit to be plucked when necessary,” he said.
Prepare for a cut in pension tax relief
Green considers it possible that the plan to cut pension tax relief has been intentionally leaked early to allow people time to sure up their pension plans.
“It could be that this story was deliberately leaked in order to drip-feed to the public the Treasury’s intention – and take away the element of surprise. However, it does also allow people time to prepare,” he said.
“As it is likely the pension contribution relief for those on higher incomes will be reduced, many might now consider making a larger one-off contribution before the Budget, in order to benefit from the higher tax relief whilst they still can.”