Savers have avoided misery in the latest Budget, as Chancellor Philip Hammond chose to maintain the existing tax relief on pension savings, despite speculation that cuts were on the way.
Unveiling his 2018 Budget speech to Parliament, Hammond also revealed that the tax-free threshold for income tax earnings would be raised from the current £11,850 to £12,500, as of 5 April 2019. At the same time, the higher rate of tax will be raised from £46,350 to £50,000.
Deloitte analysts said that this would equate to an extra £130 per year for basic rate taxpayers, £860 for higher rate taxpayers and £600 for additional rate taxpayers.
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“It’s good to see those who speculated that Hammond would cut pension tax relief proved wrong,” said Steven Cameron, pensions director at Aegon. “Unfortunately, Chancellors can see pensions and their associated tax breaks as a short-term cost rather than a long-term benefit.
“But with one of the key pressures on Government finances being longer life expectancies, it’s ever more important to encourage people to save for their own retirement rather than relying on the state to make ends meet in later life.”
The Chancellor signalled that pension reform was a priority of the government, by pledging an additional £5m to the Department of Work and Pensions, which will be used to fund a Pensions Dashboard. Due to launch in 2019, it is believed that the dashboard will make it easier for members of the public to track their personal and state pension earnings.
The government has also announced an upcoming ban on cold calling, in an effort to combat pension scams. According to recent research from Prudential, almost one in ten over-55s have been targeted by pension scammers since the introduction of Pension Freedoms in 2015. In most of these cases, fraudsters will convince savers to unlock or transfer their private pension funds by offering them higher interest rates.
“One in three over-55s say the risk of being defrauded of their savings is a major concern following Pension Freedoms,” said Vince Smith-Hughes, a retirement expert at Prudential. “However, nearly half of those approached say they did not report their concerns because they did not know how to or were unaware of who they could report the scammers to.”
The Chancellor added that he may also change the investment rules for auto-enrolment pension pots, to allow workers to access a wider range of investment options.