Nigel Green, chief executive and founder of major global independent financial adviser deVere Group, has issued the warning amid reports the Treasury is mulling plans to change the way pension contributions are taxed to help bolster the public purse amid the pandemic.
One suggestion cited is cutting the pensions lifetime allowance (LTA) to £800,000 from £1,073,100 in the next UK Budget.
The LTA is a limit on the value of payouts from pension schemes – lump sums or retirement income – that can be made without prompting an extra tax charge.
Mr Green said: “Successive governments have a long history of seeing pensions as easy targets when they need to bolster their coffers. I would suggest that if this option of slashing the pensions lifetime allowance has been leaked in advance to the media, there’s a very good chance that it will happen.
“This reported move by the Treasury would be a stinging, stealthy raid on pension savings. It would be a slap in the face for those who have worked hard and saved hard, prudently putting money aside in order to be able to enjoy their retirement with loved ones.”
He is calling for greater awareness of this possible reduction, saying such a move could affect a lot more savers than some might assume.
“There’s a much, much bigger cohort of people who should be taking action now to mitigate the financial hit of the possible slashing of the lifetime allowance,” he said.
“It’s not just those who already have a pension over £1 million. Others need to look ahead and assess if future contributions and investment growth could drag them into a position in which they’ll be above the threshold. But many savers are simply unaware of the impact of these reported moves by the Treasury on their retirement income.”
Chancellor Rishi Sunak said in March’s Budget that the pensions LTA – along with the inheritance tax threshold – would go unchanged until April 2026.
However, The Telegraph has now reported that three different changes to the way pension contributions are taxed are being considered, according to “well-placed Whitehall sources”.
One senior government source is quoted as saying: “Our job is to keep people out of poverty, not to enrich the middle classes.”
Mr Green said there were various measures that can be put in place to avoid the LTA reduction fallout, and as these would vary according to individual circumstances, independent, professional advice is recommended.
The CEO also said he believed another reduction in the lifetime allowance would be counter-productive for the country. “This move would serve as a disincentive to save as much as possible for retirement – and therefore it could be harmful to Britain’s long-term economic success,” he explained.
“I believe the reports on the potential plunder of pensions have merit. The pandemic has provided the government with a reason to do so … I would suggest people seek advice sooner rather than later.”
DeVere Group provides specialist global financial services to international, local mass affluent, and high-net-worth clients. It has more than 70 offices across the world, in excess of 80,000 clients and $12 billion (£8.6bn) under advisement.