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Pensions: UK Budget on 11 March 2020

 

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January 7, 2020

A note on the recently-announced Budget and what it might mean for pensions.

The Chancellor has announced that his first Budget will take place on 11 March. This is likely to be a markedly different affair from the Budget he intended to hold on 6 November last year, but which was cancelled when the General Election was called.

Back in November, the Chancellor was a member of a minority Government, with little realistic prospect of pushing through any meaningful – or possibly simply any – Budget measures. Now, with a majority of 80, the Government can be bold, not needing the support of any opposition members, nor indeed factions of its own Party.

As far as pensions are concerned, the Government committed to announcing in the Budget how it intends to solve the tapered annual allowance issue for clinicians in the NHS. Whether its solution extends beyond clinicians and whether it encompasses broad change to the pensions tax regime remains to be seen. But there will never be better opportunity to do so – a large majority and five years before needing to return to the electorate.

The Budget announcement explained that the Chancellor “will update the Charter of Fiscal Responsibility with new rules, taking advantage of low interest rates to invest properly and responsibly, while keeping debt under control”. While this means relaxing current borrowing constraints, it’s not likely to herald a free for all. The Conservative Party’s election manifesto said that it would “not borrow to fund day-to-day spending” and that “debt will be lower at the end of the Parliament [than at the start]”.

Governments of all persuasions invariably see pensions as low hanging fruit when it comes to funding new policies. But even if there isn’t the same pressure to reduce the annual tax relief cost (commonly misquoted as £50 billion), officials will be considering changes that would deliver a more manageable system – most commentators agree that the present system is creaking horribly.

Anyone claiming to know what the Budget will hold for pensions tax relief either doesn’t understand the decision-making process or is simply guessing. Perhaps the only safe thing to say is that it would be a genuine surprise were a long-term commitment made to retaining the current pensions tax relief system.

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