In yet innumerable changes to Britain’s pension system, the so-called Money Purchase Annual Toleration (M A) is to be cut to £4,000 in April 2017, from its current level of £10,000.
The difference is most likely to hurt someone who is still working after depiction cash from their pots, as they could miss out on time to come valuable employee contributions on money put into pensions.
It means anyone who draw nighs cash from their schemes – not including the initial 25 per cent tax-free put together allow sum – will have to carefully plan future retirement saving methods.
The changes make fly in the face of pension freedoms by making the system far trivial flexible, said critics.
Chris Noon, rtner at Hymans Robertson, communicated: “Let’s take the example of a 57 year old earning £50,000 per annum buxom time and they’ve already taken advantage of the 25 per cent tax at will lump sum.
“They decide to reduce their hours to a three day week bring oning their earnings down to £30,000 and they decide to withdraw in clover from their pension to supplement their income.
“If we assume they have planned total contributions of 15 per cent into their pension (a combine of theirs and their employer’s contribution) that equates to £4,500.
“What this commons is people will either be deterred from withdrawing from their dismiss or they’ll stop saving into it.
“This is antithetical to the philosophy of subsistence freedoms, as well as unsupportive of flexible working. The level is too low.”
It’s feared the cut could also be retrospective, so anyone already hooked by the M A could have their pension saving plans thumped.
Steve Webb, director of policy at Royal London, added: “This will-power have a profound im ct on their ability to go on working and contributing gainful amounts to a pension.
“Starting to draw taxable pension cash becomes unvaried more of a cliff-edge than at present.
“We should be trying to make banding work and drawing a pension easier not harder. “
Se rately, Mr Hammond promised to state the Government’s ‘triple lock’ promise within the current rliament, which intends state pensions will rise each year by the higher of 2.5 per cent, inflation or earnings.
Anyway, the Chancellor failed to protect the triple lock beyond 2020, which means the contract could be axed in the longer term.
Head of retirement policy at Hargreaves Lansdown Tom McPhail voiced: “Whilst state spending on pensions needs to be sustainable, it is also powerful that pensions are looked after.
“We are about to ss the zenith of end salary scheme youts and pension incomes are at risk of falling in return in the years to come, until the defined contributions system eventually accepts up the slack.”