This week has seen the government confirm that it will cut the amount that pensioners can contribute back into their pensions each year. This was a surprise move as many people thought that the plans would be shelved thanks to the poor result of the snap general election.
The original proposals from the Chancellor the Exchequer Philip Hammond were that the annual savings limit be cut from £10,000 to £4000 for those people who have already made use of pension freedoms. This change was meant to stop the practice of people 'recycling' their pensions which is where they withdraw cash from their pension pots and then claim tax relief on new contributions. It was due to come in in April but put on hold because of the election. However, it has now been announced that the cut will be reinstated and will be retrospective from April 2017. The move has not gone down well with industry experts.
Steve Webb, former pensions minister said the move was "outrageous" and "arrogant".
"Cutting the limit is an unnecessary measure in the first place, but it is particularly unacceptable to do so with retrospective effect. How were savers meant to know in May who was going to win the election? " he said.
"This is an arrogant announcement based on the assumption that the DUP will vote with the Government on tax measures and so any tax change can be got through the House of Commons."
Rona Train, a partner at Hymans Robertson agreed. "This decision, which will save the government around £70 million per annum has been made at the great expense of those wanting or needing to supplement their retirement income."
"The Government is clearly trying to stamp out recycling pension savings whereby people could get a double hit of pensions tax relief by withdrawing money from their pension and then reinvesting it."
"However, retirement is no longer the cliff edge event seen in previous generations and is now often a process that continues over a number of years."
"In some cases, savers are simply unable to retire early but will equally struggle to continue working full time, whether this is for health reasons or caring responsibilities. In these cases, the government should be doing all it can to offer support."