The pensions industry has given a cold reception to proposals by chancellor Philip Hammond to cut an important pensions allowance.
Mr Hammond has suggested cutting the money purchase annual allowance (MPAA) from £10,000 now to £4,000 by April 2017. The allowance was introduced in 2015 to enable pensioners who had already accessed their pot to receive tax relief on new contributions up to £10,000.
By reducing the MPAA to £4,000, the government said it was aiming to stop people from recycling their pension savings to take advantage of the tax relief.
However, initial reactions from the pension industry suggested it wasn't enamoured by the proposal.
Greg Kingston, head of communications, product & insight at Suffolk Life, said: “Reducing the MPAA to £4,000 sends the wrong signal to savers. Workers today phase their retirement to a greater extent than ever before, and reducing the flexibility to do so is a step backwards.”
Martin Tilley, director of technical services at Dentons Pension Management, said: “This change is unlikely to produce significant Treasury revenue and is an unnecessary tweak, where at this juncture none was required.”
Steve Webb, director of policy at Royal London and a former pensions minister, said cutting the allowance "flies in the face of efforts to make retirement more flexible".
"We also need to know what will happen for people who have already drawn taxable cash expecting to be able to go on saving £10,000 per year. Any retrospective change would be totally unfair to savers."
The government consultation will end on Wednesday 15 February 2017. Submissions should be sent to MPAAResponses@hmtreasury.gsi.gov.uk.
