Industry bodies have reacted to the proposed changes to the money purchase annual allowance (MPAA) due to come into effect in April 2017.
The allowance was introduced in 2015 in order to prevent people receiving tax relief on contributions, withdrawing the money and then adding it back to their pension to receive more relief.
Tax-relieved contributions are currently restricted to the MPAA for contributions made to defined contribution pensions.
Chancellor Philip Hammond announced in Autumn Statement 2016 that the MPAA will be reduced from £10,000 to £4,000.
However, some groups have said that reducing the allowance could act as a barrier to individuals saving. In addition annual fluctuations in the allowance could lead to more confusion in the pension system.
Fiona Morrison, immediate past president of the Institute and Faculty of Actuaries, said:
“We believe that the planned reduction in MPAA could have unintended consequences, and so call on HM Treasury to re-examine the potential benefits of this policy, compared to the potential risks of unforeseen outcomes.”
Yvonne Braun, director of policy, long term savings and protection at the Association of British Insurers, said:
“At a time when we are encouraging people to work for longer and to save for their retirement through auto-enrolment, it seems contradictory and counterproductive to limit their options to do so through a reduction in the MPAA.”
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