The majority of advisers would like to see the money purchase annual allowance (MPAA) reformed, after the Covid-19 pandemic demonstrated how “unfair” it is for savers seeking to access their pension pot.
According to a survey by AJ Bell, 83% of advisers would support a reform, with two in five (40%) calling for it to be scrapped altogether.
Almost a third (30%) would like to see the annual allowance increased from £4,000 to £10,000, while 9% would like to see a temporary stop to the allowance during the current crisis.
Tom Selby, senior analyst, AJ Bell, said: “Even before Covid-19 hit, the MPAA felt like an unfair punishment for savers whose only crime was accessing taxable income from their pension pot.
“During this crisis many more over 55s will be facing salary cuts or joblessness, while others will need to use their savings to help loved ones struggling to make ends meet. In such an environment, hitting people with a 90% annual allowance cut for taking even £1 of taxable income from their pension feels deeply unjust.”
Selby said that while there are various easements to the MPAA the Government could consider to help savers, the simplest would be to abolish it.
Selby added: “This could then mark the beginning of a radical pensions reform agenda, with the aim of simplifying the unnecessarily complex tax rules savers have to navigate and encouraging more people to save for their financial future.”
The latest findings follow earlier research from AJ Bell, which showed that during the early stages of lockdown one in 10 over-55s had accelerated plans to access their retirement pot, with many more likely to consider doing this as the Government support for businesses is pulled back between now and October.