The improvement in the public finances revealed by the Chancellor in his Spring Statement means he now has no excuse for an Autumn Budget raid on pension tax relief, according to Royal London policy director Steve Webb.
In the Spring Statement, the Chancellor said that public borrowing in each year from 2020/21 was expected to be £5-£6 billion a year lower than previously forecast. But there were no giveaways in the Statement and how this extra fiscal headroom will be allocated will depend in part on the outcome of a full spending review due to be started later this year.
Last Autumn the Chancellor said that the cost of pension tax relief was ‘eye-wateringly expensive, and hinted that more cuts were likely, over and above the six separate cuts to lifetime and annual limits since 2010. But now that there is less pressure on the public finances than previously thought, there would be no justification in going ahead with such cuts.
Steve Webb, Director of Policy at Royal London said:
‘Too often, governments have raided pension tax relief for extra revenue to meet a short term spending crisis. Now that the public finances are improving faster than expected, there is no justification for further ‘salami slicing’ of limits on tax relief. Pensions should be a long-term business, not subject to annual tweaking by cash-strapped Chancellors. An improving fiscal picture means the Chancellor should refrain from any further short-term cuts’.
About Royal London:
Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June 2018.