JEFF PRESTRIDGE: New Chancellor Rishi Sunak needs to make his mark…by improving our pensions
With the smell of a spring Budget in the air comes the rumour of yet more restrictions on the tax relief available to boost our pension saving.
Pensions that, in return for the Government’s initial generosity, we pay tax on when we start to take income from them in later life to support our financial independence. Win, win.
These pension whispers (often Chinese-like) start every year at roughly this time, just as the crocuses are rearing their beautiful heads and £1 bunches of daffodils swamp our supermarkets (I can’t get enough of them).
This year has been no different with rumours swirling around for the past week – as vigorously as Storm Ciara was blowing seven days ago – that the Chancellor of the Exchequer was planning yet another Conservative raid on pension tax relief.
Promotion: Former Goldman Sachs banker Rishi Sunak is super rich, super keen and chomping at the bit to make his mark as Chancellor
Yet more restrictions on the amount of tax fillip that higher and additional rate taxpayers get when they contribute to a works or personal pension.
But it now seems that any proposals for reform (cutbacks) may well have been blown into the choppy North Sea like Storm Ciara – and left to dissipate for a while.
A result, of course, of Sajid Javid’s dramatic resignation on Thursday as Chancellor. Into his shoes has stepped former Goldman Sachs banker Rishi Sunak, super rich, super keen and chomping at the bit to make his mark.
While Mr Sunak may well pursue a policy of attacking the pension tax breaks available to high earners, it would seem wrong to do so without first getting his feet firmly under his desk at the Treasury.
On such a basis, it seems March 11 (the likely date of the next Budget although it might get pushed back) is far too early for him to get his bright head around all the pension numbers and conclude that pension tax relief on contributions is still too generous to too many people.
No, consideration and contemplation should be the order of the day.
My take on pensions is altogether different to many of those who currently sit in Government.
Rather than introduce yet more restrictions on how much people can save into a pension, Mr Sunak (and for that matter Dominic Cummings and Boris Johnson) should be looking to encourage pension savings.
That means less meddling, less complication and a freeing-up of some of the more claustrophobic rules that penalise prudent management.
New start: Mr Sunak should be looking to encourage pension savings, says Jeff Prestridge
For a start, the lifetime pension allowance – an effective limit on how big a pension fund can grow to before the Government imposes extra taxes on it – is ripe for abolition.
As is the system for reducing the right of additional rate taxpayers to put money into a pension, boosted by tax relief.
So, Mr Sunak, no more paring back of pension tax breaks. Instead, use your inaugural Budget to announce a moratorium on such cutbacks – and while you’re at it, squash the mansion tax idea once and for all and commit to ridding the country of inheritance tax.
Less tax. More freedom. More encouragement to look after ourselves in retirement.
No week has gone by in recent memory without a dozen or so readers venting their spleen over the Woodford investment debacle – and calling for financial justice to be done.
Sadly, it seems ‘justice’ is as far away as it has ever been. The Financial Conduct Authority continues to sit on its hands and do the square root of nothing while Hargreaves Lansdown, the main Woodford marketeer, acts as if it has done no wrong.
Its recent report, a regulatory requirement, into the running of its multi-manager funds was a whitewash.
Despite the funds having between them some £600million of exposure to failed fund Woodford Equity Income, Woodford didn’t get a mention in the entire 78-page report.
No explanation, no mea culpa. It’s as if the Woodford debacle had not happened.
And of course, Hargreaves’ verdict on its own multi-manager funds? ‘We believe these funds continue to offer value for money based on all the factors we have considered.’ How enlightening.