UK pension savers should take action now to lessen the financial hit of a potential stinging, stealthy raid on their pensions this autumn, warns the CEO of one of the world’s largest independent financial advisory organisations.
The warning from Nigel Green, chief executive and founder of deVere Group, comes as The Daily Telegraph reports that “well-placed sources” have said that the Treasury is considering plans to change the way pension contributions are taxed.
The government has been open about the need to raise money following a massive increase in public spending during the pandemic.
According to the media report, one proposal is to cut the pensions lifetime allowance (LTA) from £1,073,100 to £800,000 in the next Budget.
Mr Green says: “Successive governments have a long history of seeing pensions as easy targets when they need to bolster their coffers.
“I would suggest that if this option of slashing the pensions lifetime allowance has been leaked in advance to the media, there’s a very good chance that it will happen.
“This reported move by the Treasury would be a stinging, stealthy raid on pension savings.
“It would be a slap in the face for those who have worked hard and saved hard, prudently putting money aside in order to be able to enjoy their retirement with loved ones.”
Awareness of this possible reduction in the LTA is a “big deal,” says Nigel Green, as it could affect a lot more savers than some might assume.
“There’s a much, much bigger cohort of people who should be taking action now to mitigate the financial hit of the possible slashing of the lifetime allowance.
“It’s not just those who already have a pension over £1m. Others need to look ahead and assess if future contributions and investment growth could drag them into a position in which they’ll be above the threshold.
“But many savers are simply unaware of the impact of these reported moves by the Treasury on their retirement income.
“There are various measures that can be put in place to avoid the LTA reduction fallout.”
The steps that can be taken will vary according to individual circumstances and, as such, independent, professional advice is recommended.
In addition to delivering a blow to savers, another reduction in the lifetime allowance would be counter-productive for the country.
“This move would serve as a disincentive to save as much as possible for retirement– and therefore it could be harmful to Britain’s long-term economic success,” affirms Mr Green.
The deVere CEO concludes: “I believe the reports on the potential plunder of pensions have merit. The pandemic has provided the government with a reason to do so.
“Many more people than you might think would be affected by such a move.
“There are steps to be taken to mitigate the hit. I would suggest people seek advice sooner rather than later.”