Over the weekend, the UK’s papers announced that Chancellor George Osborne would not be introducing changes to UK pensions’ tax relief in next week’s Budget. The financial services industry had been bracing itself for further radical changes being announced only a year after the revolutionary pension freedoms came into force in April 2015. Mr. Osborne had been considering introducing either a flat rate of tax relief on pension contributions which would have negatively affected higher rate tax payers in the UK or a pension ISA which would have ended upfront tax relief on pension contributions.
It was widely reported that the shelving of plans to overhaul pensions tax relief was as a result of fears of upsetting Tories ahead of the Brexit referendum in June this year. A Treasury source said it was “not the right time” to make changes.
The pensions industry are welcoming the announcement which ends months of intense speculation about what changes were to be announced. However, the fact that the Chancellor is not making any announcements next week does not mean that changes might not happen in the future. An ally of the Chancellor noted that the “pensions consultation has been open-ended, to look at how the system is working”.