Rumours of a pensions grab have been beneficial to marketeers of self-invested personal pensions (Sipps), who have been persuading investors to add to their Sipps before the Chancellor reduces tax relief or allowances.
But they are now backtracking. "There will almost certainly not be any cut to the rate of tax relief granted to higher-rate taxpayers on their contributions. Any move to restrict tax relief would be a tyre-screeching u-turn, given that this government only restored full tax relief a year ago," says Tom McPhail of Hargreaves Lansdown.
Andy Bell, chief executive of AJ Bell (which owns SippDeal) adds: "Any Chancellor who chooses to remove higher-rate tax relief on pension contributions will go down in history as the architect of the demise of pension saving as we know it. It will relegate Gordon Brown's £5bn-a-year raid on pension schemes back in 1997 to a petty pilfering misdemeanour."
Nevertheless, if pensions tax relief makes the Chancellor's agenda next week, accountants at Baker Tilly say any change will not be quick as it will need systems rewrites at HMRC, pension providers and employers. So we should expect consultation for an expected change from April 2013. An immediate change could be made through the self-assessment system but this would require tax returns from many people not in the system.
The move now most widely suspected, being easiest to implement, is a simple reduction in the £50,000 a year pensions contribution allowance, to say £40,000. That is hardly radical and only likely to affect a minority of Sipp investors. "This might help to appease those who object to the tax relief benefits enjoyed by higher earners," says Mr McPhail. "Unlike other measures it would be simple. However, it would also generate no more than a few hundred million pounds at most."
Baker Tilly advises that taxpayers who wish to pay large contributions that would currently attract full tax relief and who prefer safety first should do so before Budget day, in case the shutters come down overnight.
Meanwhile, more than one in five employees say they do not trust the government on pensions, according to a survey by the National Association of Pension Funds.
This is the crux of the problem and why we need the government to leave pensions alone.
If goalposts on allowances and/or tax relief are moved next week, then this will set the ground for more changes in the 2013 Budget, and subsequent Budgets. Chancellors may be tempted to make changes retrospective, meaning your pension pot could become much less valuable. For me, that means there is less reason to make a last minute top-up to a pension contribution before 21 March, rather than more.
Here are my three golden rules for pensions:
■ Only contribute what you can afford to lock away and risk being subject to changes in pensions legislation.
■ Don't be swayed by marketing and don't let the tax tail wag the pensions dog.
■ A pension is not always the best option for your money. Consider Isas too.
The bottom line is that the public can't take more tinkering with the pension system. All people saving for retirement need reassurance that the government isn't going to move the goalposts halfway through their working life or just as they come to retire. So if they do announce changes to pensions next week, then they need to impose a moratorium on further changes that is backed by all parties and will last for at least 10 years.
