Corporate Adviser editor John Greenwood looks at how the political calendar will influence the pension tax relief debate.
While the nation has, in the Brexit debate, a single preoccupying subject to examine from every possible angle, the world of benefits has two. For benefits professionals of all types, the outcome of the review into incentives for retirement saving is as significant, if not more so, than the question of whether the UK quits the EU. Not only will the review probably turn pensions on its head but changes to tax relief and NI could impact healthcare and group risk in a major way.
Politicians don’t do anything by chance and are all too aware that valuable political capital can be lost through poor timing. So what can we learn from the dates chosen for the determination of these two momentous decisions: 16 March and 23 June?
The Brexit referendum takes place the day after the group stage of the Euro 2016 football tournament – where England, Wales and Northern Ireland all have a decent chance of progressing (lets not forget three teams from a group of four can progress) – but before the knock-out phase, where the risk of feelgood failure rises considerably. Is the ‘In’ campaign betting on a positive Euro glow as our boys flatter to deceive in the early stages? I’m sure it has crossed at least one spin doctor’s mind.
When it comes to the pension tax relief announcement, it’s more a question of how the date on offer – Budget Day – influences the decision. So will Brexit restrain the Chancellor from being as radical as he’d like? Times columnist and former Tory activist Tim Montgomerie argued in a recent blog that the Government was effectively in shut-down mode until July – with the prime minister unlikely to do anything deeply unpopular until the referendum was out of the way. Now the FT reports that David Cameron is urging Osborne to toe a cautious line while Brexit remains an issue.
But cutting tax relief for the wealthiest 12 per cent is likely to be intensely unpopular with the media, and with virtually everyone else in a position of power and influence.
George Osborne could decide to do nothing significant on 16 March, in which case Brexit fears may be the reason. But all the signs are that he will not. The question then becomes how far he is prepared to go. No other avenues to cutting the deficit hold anywhere near the potential of pension tax relief and salary sacrifice. But even flat-rate relief will cost him some political capital. He may just conclude that he is better being hung for a sheep as for a lamb and go all out for the pension Isa.