Ever since the last Budget, rumours have been rife that the Chancellor (like many before him) is set to revisit pensions tax reliefs in order to extract much needed funds to bolster Treasury coffers. With annual contributions to pension funds set to exceed £80bn and tax relief costing £35bn, it is no wonder successive Chancellors have seen fit to curb the cost of pensions. So what exactly are the runners and riders in this years’ pensions grand national Budget?
- Pensions ISA: a yearling that showed early promise when it first came to prominence last year. However it’s unlikely to last the pace as it lacks the simplicity much needed in this four-horse race.
- Tax-free lump sum: prefers the soft ground found in reducing tax breaks for the well-off. One that has been heavily backed in recent weeks as the £4bn cost is acknowledged by experts as an easy target. Likely to falter in the closing furlongs as it will be deeply unpopular with those approaching retirement.
- The fixed tax relief: its time will almost certainly come, but this year might be too soon for this early season favourite. Will perform best when George Osborne has ironed out the evident problems in taking the tax reliefs away from payrolls and into contributions.
- Do nothing: my firm favourite. At a time when Mr Osborne and Mr Cameron need all the friends they can muster, it is hard to envisage a situation where they would risk alienating so many potential supporters by tinkering with what is a very popular tax relief. Will perform even better if accompanied by yet more consultation, an ever-present in politics.
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