Chancellor George Osborne has binned plans to unleash further radical changes to the pensions systems, according to widespread national media reports at the weekend, though there has been no official Treasury comment either confirming or denying this. A number of experts believe, if reports are correct, the plans will be shelved and revisited rather than scrapped entirely.
If the reports prove true, the consultation launched last summer following the Budget might prove costly for the Government coffers, said AJ Bell, which estimated this could be as much as £1.5bn.
Financial Planning Today asked the Treasury if it recognised or accepted that this figure was accurate and requested a response to AJ Bell’s claims. It is yet to provide an answer.
Andy Bell, chief executive of AJ Bell, said: “The Government’s plan to reduce the cost of pension tax relief could have backfired spectacularly. Far from saving money, the uncertainty created by the consultation and scare stories from former ministers has led to a surge in pension contributions and there will be a heavy cost to this for the Treasury.”
He said: “This re-affirms my long held view that trusting politicians to make significant policy decisions on pensions tax relief is like trusting a troop of foxes to babysit a brood of chickens.
“The pension saving public would be better served by an independent Pension Commission with a mandate to manage UK pension policy and provide certainty and confidence to savers.”
The Treasury said it does not comment on what it deems ‘Budget speculation’.
A Government spokesperson later responded to FPT's questions with this statement on the AJ Bell claim: “There is no published data to suggest that this claim is accurate.
“The Government has always encouraged people to save and plan ahead for later life. Our consultation on pensions tax relief was about how the system was working and we have always been clear that this involved looking at all the options, including the current system."
AXA Wealth reacted to the reports that changes would be shelved with this statement:
"Over the last few days there has been a great deal of speculation as to what the Budget will bring this year, leading to unhelpful confusion for consumers.
“It is reassuring to see that the Chancellor has listened to concerns, and is taking a common sense approach to tax relief. Let's hope this issue is not revisited in a year or two. We'd now like to see some stability in pensions savings, after the seismic changes that came in last year."
Jamie Jenkins, head of pensions strategy at Standard Life said if the decision had indeed been made to “avoid any major changes to pensions tax relief” then it would be “a sensible one”.
He said: “With automatic enrolment at its peak and the pension freedoms still bedding in, it's essential that we focus on how we support savers.
“We welcome the fact that the government has conducted such an open debate on incentives to save and in doing so has been able to fully explore the pros and cons of the various options.”