The Government has refused to commit to a pension tax lock following a petition by AJ Bell.
The petition, which has received more than 22,000 signatures, proposes a commitment not to reduce the amount people can withdraw from their pension tax-free or the amount of tax relief given on pension contributions.
The Government previously responded in October, ahead of the Budget, stating that it does not comment on proposed tax changes or tax related speculation ahead of Budgets.
In its latest response published this week, the Government said it wishes to encourage pension saving but would not introduce a pension tax lock.
The response stating: “The Government keeps all aspects of the tax system under review as part of the annual Budget process, and in the context of the wider public finances, and does not intend to introduce a pensions tax lock.
“The Government recognises the importance of promoting confidence in pension saving and is committed to ensuring future generations of pensioners have security in retirement. This is why the Government announced a landmark two-phased review of the pensions system days after coming into office.”
However, AJ Bell said the Chancellor has “comprehensively failed to deliver much-needed certainty for pension savers” by rejecting its calls to commit to a pension tax lock.
Tom Selby, director of public policy at AJ Bell, said: “The Government says it wants to ‘encourage pension saving’ and insists it understands the need for ‘promoting confidence in pension saving’. But in the same breath reveals the blatant contradiction in its own thinking by declining to end speculation that damages confidence in the system.
“Having overseen one of the leakiest Budgets in living memory, the Government must be well aware it has created the conditions for rampant speculation. It is now knowingly turning a blind eye to the consequences and refusing to do anything to address it, leaving people in limbo once again.
“This runs a real risk that each successive Budget until the next general election will be met with the same doom loop of unbridled rumours about the fate of pension tax incentives, resulting in more people accessing their pensions for the wrong reasons.”
Selby said a commitment to pension stability would encourage retirement saving, giving people certainty the Government won’t foist extra income tax on their savings, either by curbing tax relief on contributions or reducing tax-free cash at retirement.
“Despite this, the fact remains that pension savers should focus on their long-term plans for retirement when choosing to access their pots, not be swayed by the wildfire of pension tax speculation the Government seems so unwilling to put out,” he added.
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