EY raises concerns over Osborne’s pension reforms

Following the Chancellor’s statement this afternoon, EY’s Head of Tax Policy, Chris Sanger, said: “In his last Budget the Chancellor resisted pulling too many rabbits out of his hat. This was more of a Paul Daniels Budget (You’ll like this, but not a lot) than a Dynamo one.

“The oil industry will welcome the help with the cut in both the supplementary charge and the petroleum revenue tax, as well as the investment allowance.

“The banks again find themselves in the unhappy position of funding much of this otherwise revenue neutral Budget.

“On the personal tax side, the Chancellor had a few goodies for potential voters, covering ISAs and his usual favourite of Personal Allowance.

“He still left alignment of the jobs tax limit with personal allowances as a job for future inhabitants of Number 11.

“All in all, the Budget content seemed clearly focussed on the short term election plan.”

Other senior figures in the company raised concerns over the Chancellor’s pension reforms.

Malcolm Kerr, Senior Adviser to EY said: “Freedom and flexibility to manage your money in retirement should be encouraged, but there is concern we could end up with more people relying on their state pension if personal financial decisions go sour.

“Given the efforts behind auto-enrolment, which was designed to further safeguard people in retirement, this would be ironic. 

“Allowing current annuity holders to cash in their annuity will see the rise of a secondary market, and there’s little doubt it will be a buyers’ market.

“Advice and/or guidance will therefore be fundamental to help people make the best decisions for their personal circumstances and ensure a financially secure retirement.”

Jason Whyte, Insurance Director at EY, added: “The government has long been concerned with the proportion of pension tax relief that is claimed by higher rate taxpayers, and a further reduction in the lifetime limit is an obvious way to curb it.

“However, it could clash with the reforms announced in the Autumn Statement allowing dependents to inherit pension wealth tax free, and after the election we may see something more radical such as a flat rate of tax relief for all pension savers.”