Key firms are calling for an extension of the ISA and pension deadlines, the scrapping of MPAA and a reduction in the Lifetime Isa exit penalty in response to current crisis and the ‘lock down’ effecting financial services firms around the country.
National advice firm LEBC has called upon the Treasury to relax the deadline for savers to make ISA savings plans and pension contributions by two weeks.
Kay Ingram, director of Public Policy at LEBC Group, said: “Given the unprecedented disruption to normal daily life, many savers will not yet have made arrangements to use their ISA allowance or make pension contributions for the current tax year”, says p. “In responding to the crisis, those in essential services in the health service, civil servants, food producers and distributors – as well as businesses throughout the country – could lose out. It would be unfair if in responding to the emergency, people missed the opportunity to plan for their longer-term future. In these special circumstances, we would like to see the tax year deadline of 5 April extended to 19 April, as a special one-off measure.”
As with so many businesses, LEBC has closed its offices and switched its staff to home working. The firm said it is conscious that many individuals, whose attention has been focused squarely on the short-term emergency, are likely to need extra time to plan for their future this year and to make these arrangements.
AJ Bell has urged the government to scrap the money purchase annual allowance as part of its Coronavirus response.
The pensions specialist said the move would enable over-55s who access taxable income from their pension to rebuild their pension savings quickly once the crisis is over.
Tom Selby, senior analyst, AJ Bell, said: “With the UK staring down the barrel of economic disruption and potentially substantial job losses as a result of the Coronavirus pandemic, it is important the savings system doesn’t unnecessarily penalise individuals responding to unprecedented circumstances.
“At the moment, anyone who accesses taxable income from their pension is hit with the MPAA, lowering their annual allowance from £40,000 to just £4,000. In tough times it is likely more people will turn to their retirement pot to cover a short-term income gap, and in these circumstances it feels unfair to handicap their ability to rebuild their retirement savings once the crisis has lifted.”
In addition, AJ Bell have also called for a reduction in the Lifetime Isa exit penalty from 25% to 20% to help young savers.
Current rules mean anyone taking money from their account for reasons other than buying their first home or before the age of 60 will be penalised with a 25% charge on the amount they withdraw. There are currently 200,000 people with Lifetime Isas who would be hit with an exit penalty if they needed to access their funds to cope with the financial impact of Coronavirus, according to AJ Bell.
Selby said that recent stock market falls means they will already be getting back less than they put in and the exit penalty would serve to punish them further.
He added: “Given many Lifetime Isa holders will now be facing significant employment uncertainty, we urge the Treasury to reduce this to 20%, so the charge just returns the upfront bonus plus any investment gain or loss. This means younger investors would only suffer market losses on their original investment rather than an additional penalty from the Government.”
