Magazine article Public Finance

Chancellor Accused of Destroying Pension Policy

Magazine article Public Finance

Chancellor Accused of Destroying Pension Policy

Article excerpt

Chancellor George Osborne's pension reforms will bring in a short-term boost for the public finances but have been criticised for a lack of consultation and long-term modelling of their impact.

In the centrepiece announcement of his Budget statement, Osborne unexpectdly reduced tax restrictions on defined contribution pension pots. This will make it easier and cheaper for people to make cash drawdowns, rather than relying on often low-paying annuities.

The chancellor said he was putting pensioners in charge of their own finances and bringing the tax treatment of defined contribution pensions 'in line with the modern world'. The changes will take effect from April 2015 and are expected to bring in an extra £1.2bn in tax receipts in 2018/19, according to figures in the Red Book.

Ed Wilson, pensions director at PricewaterhouseCoopers, told Public Finance there would be a beneficial short-term impact for the public finances.

'The government assumes that people would be more likely take more cash at retirement or near retirement rather than spreading it over an entire life of retirement.

'[Drawdown] is going to be taxed at marginal rates. …

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