The 2017 budget was one of only two of the last nine where there was no alteration to the pension landscape and there are various thoughts on further potential pension changes.

Perhaps the most radical suggestion to date is the replacement of the current Exempt, Exempt Taxed (EET) arrangement with a TEE (Taxed, Exempt, Exempt) alternative. The brainchild of Michael Johnson, from the Centre of Policy Studies, would see a Pension ISA type arrangement instead of the current pension structure. Mr Johnson does have a history of influencing Government policy and the Lifetime ISA was thought to be a means of testing the water for a potential future implementation. 

Whilst the change to a TEE regime cannot be ruled out, we believe it is unlikely to be introduced in the short term, as it would be radical and far-reaching.  With auto enrolment being regarded as a success, to replace the current system now would appear drastic and with Government resources already stretched, there are other more pressing matters.

For the same reason, a switch to a flat rate tax relief model is also unlikely. The need to consider and implement changes to relief at source, employer contributions and defined benefit accrual would take some considerable time and require an appreciable consultation and implementation period.

One commentator has suggested the Chancellor could reverse the more favourable death benefit rules introduced in 2015 to raise funds for the Treasury. However, as many saw the change in 2015 as a positive step for pensions, such a reversal is likely to cause ill feeling amongst the electorate.

Similarly, the Lifetime Allowance has only recently seen the reversal of the downward trend by the implementation of indexed uplifts, effective from April this year. A change here would also call into question the Government’s ability to make and adhere to long-term policy.

With any budget, we cannot fail to mention the possible withdrawal of, or limitation of, the Pension Commencement Lump Sum (PCLS). At their recent party conference, the Liberal Democrats headlined a proposed limit on an individual’s PCLS (tax-free cash lump sum) to £40,000. Whether immediate implementation of this would be possible is doubtful, because such change would have retrospective effect for those who have been building up funds for many years. There would need to be some form of transitional protection for such individuals and again we are looking at complex legislation and ill feeling, two things that discourage people to save. 

Our best guess for any change would be a further reduction in the Annual Allowance from its current level of £40,000. As far as simplicity of change is concerned, this is the least difficult to accommodate but it would continue the “tinkering” made by successive governments since pensions tax ‘simplification’ in 2006.