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Press comment: Age-linked tax relief and annual allowance taper pose risk to pensions


If you are covering speculation about the possible introduction of an age-linked pension tax relief system and/or the Office for Budget Responsibility report on the long-term impact of the annual allowance taper, please see the following commentary from Old Mutual Wealth pensions expert, Jon Greer:

“It is questionable whether an age-linked system of pension tax relief would really create a more effective, better-targeted incentive to save. In principle the proposals make sense, but in practice they would need to be tested extensively to ensure they achieved the desired impact.

“Were these proposals taken forward it would see the UK commit to a social experiment on a grand scale, with the results only becoming apparent decades into the future when today’s younger savers are headed toward retirement.

“Despite the generous relief available on pension contributions today, many people aren’t fully aware that system of incentives exists. By itself, simply changing that system is not going to make any difference to the way those people think about long-term saving.

“There are a lot of people that choose to boost their pension contributions when they inherit money, sell a business or simply start earning more in salary and bonuses when they’re older. While they miss out on decades of investment growth by doing so, those people that planned to save later in their working lives would be punished by an age-linked system.

“And we should not under-estimate the risk that further reform to the pension system may leave people disengaged. It takes time to adapt to change. Consumers are still getting to grips with auto-enrolment and pension freedom reforms, which radically alter the way we accumulate and decumulate savings respectively. Another change to the system might just leave people more confused.”

“The annual allowance taper is extremely complicated. Looking ahead to next month’s Autumn Statement the new Chancellor should consider whether it is really worth persevering with.

“Philip Hammond is in a position to backtrack on the annual allowance taper and attribute it to an error from his predecessor, George Osborne. The OBR paper published yesterday gives him ample justification to do so.    

“The taper looks like a measure designed by policymakers working with a spreadsheet to find some extra tax revenue, but with limited or zero sympathy for practical application in the real-world.

Jon Greer“For example, many people, particularly the self-employed, will not know how much their adjusted income will be until after the start of the next tax year.  For others, receipt of a bonus at the end of the year, or a taxable redundancy payment, could give an unexpected boost to their adjusted income that could result in them becoming subject to an annual allowance tax charge.

“The policy is also particularly complicated for defined benefit scheme members. Many will end up exceeding their annual allowance. While in some cases the charge will be met by the employer via a reduction in their pension entitlement, some will not have this option and the tax liability will have to be met directly by the individual from their own resources.”



For more information contact

Tim Skelton-SmithOld Mutual Wealth02380 916 99807824 145
Michael GlenisterOld Mutual Wealth020 7778 963807469

Notes to Editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £109.8 billion in customer investments (as at 30 September 2019, excluding Heritage life assurance).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions; and discretionary fund management.

The business is comprised of two segments: Advice and Wealth Management and Wealth Platforms.

Advice and Wealth Management encompasses the financial advice business, Quilter Financial Planning; the discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

Wealth Platforms includes Old Mutual Wealth UK platform and Old Mutual International, including AAM Advisory in Singapore.

The Old Mutual Wealth Heritage life assurance business was acquired by ReAssure Group Plc on 2 January 2020.

Since its IPO in June 2018, Quilter plc’s businesses have progressively rebranded to Quilter, as follows: 

  • Quilter Financial Planning (previously Intrinsic)
  • Quilter Private Client Advisers (previously Old Mutual Wealth Private Client Advisers)
  • Charles Derby Group (becoming Quilter Financial Advisers)
  • Quilter Financial Adviser School
  • Quilter Cheviot
  • Quilter Investors
  • Old Mutual Wealth (becoming Quilter Wealth Solutions in 2020)
  • Old Mutual International (becoming Quilter International in 2020)

This press release is for journalists only and should not be relied upon by financial advisers or customers.

Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.