The pensions industry and advisers have welcomed Labour’s renewed stance to not reintroduce the lifetime allowance, saying the pensions world needs clear, consistent policy.
Andrew Tully, technical services director at Nucleus, said reintroducing a limit which has just been scrapped would cause confusion for customers as well as further increase costs for businesses.
He added: “Our Retirement Confidence Index highlighted very clearly that people want stability, trust and long-term decision making within the pensions and long-term savings market. We need less political ping-pong and more long-term consensus.”
According to the FT, Labour has dropped its proposal to reintroduce the LTA because it would add uncertainty and be too complex to carry out.
Nick Henshaw, head of intermediary distribution at Wesleyan, said in order for advisers to do good financial planning, they need “clear, consistent policy that supports long-term strategies”.
“That’s what this decision delivers, and why it is so welcome. It is particularly good news for experienced public sector professionals, such as medics and headteachers, who have been facing years of punitive pension tax issues because of the LTA.
“In our view, even proposals to re-introduce the LTA with exemptions for public sector workers would have been problematic – creating a wedge between public and private sector taxpayers and only adding to the pensions complexity that public sector workers already face.”
Elsewhere, commenters on FT Adviser said it was the only sensible decision.
One reader said: “Everything else is a sledgehammer to crack a nut. Limit what goes in by all means - even reduce tax relief if absolutely necessary - but trying to cap out what comes out and penalise good performance was always mad.”
Another said: “A sensible approach would be to reduce the annual allowance, or to peg tax relief on contributions to the basic rate of income tax.”
Providers breathe sigh of relief
Providers have welcomed the news as reinstating the LTA would have undone a lot of work from this year when they had to rush to prepare for the LTA’s abolition.
Steven Cameron, pensions director at Aegon, said: “We understand that the abolition might appear like a tax break for high earners, and not aligned to traditional Labour policy. But the removal has proven excruciatingly complex and attempts to reinstate could have tied the pensions industry, as well as a new government, in knots.
“The rules removing the LTA have still not been finalised and the next government should ensure HMRC plugs the gaps so those individuals currently in limbo can sort out their pension affairs.”
Members of small self-administered pension schemes were also able to breathe a sigh of relief.
Nathan Bridgeman, director of SeaBridge Ssas, said Ssas members now have the confidence to pay large contributions into their pensions without fear the prudence and good investment will be penalised.
