The announcement in last week’s Budget that the lifetime pension allowance will be reduced from £1.25 million to £1 million is sending a mixed message to savers – save for the future, but not too much.
At a time when the government is encouraging people to save a greater proportion of their salaries into pensions and allowing them the freedom to choose how they access that money when they retire, cutting the lifetime allowance seems a retrograde step.
While reducing the lifetime allowance will only impact a tiny percentage of savers – this change once again highlights the ways in which pension reform is being used as a party political tool.
While many of the recent changes are welcome and long overdue, pension policymaking should be based on long term objectives and built on consensus – not short term gain. This is why we’re backing the recommendations made in the recent Work and Pensions Committee report which said that a new independent pensions commission, along the lines of the 2005 – 2006 Turner Commission should be established.
The commission would take an evidence based approach and could play a crucial role in scrutinising how these reforms impact one another and recommend further improvements where necessary.
While pensions and politics can never be entirely divorced, injecting a greater measure of objectivity into policymaking has to be beneficial.