Worrying changes for pensions
Dani AwSenior Research Analyst
Hi Everyone,
With the arrival of yet another Work & Pensions Secretary (the seventh since 2005), I thought it would be a good time to update you on some of the changes that have been happening since I was last in contact.
Most obvious is the aforementioned instatement of Yvette Cooper to the position recently vacated by James Purnell.
Considering the deepening complexity of the pension conundrum, Cooper certainly has a lot of work to do if she is to secure the future welfare of the 12 million pensioners in the UK. However, there are already doubts over her ability to fulfil this role, particularly in reference to her part in the newest pension reforms set out in the latest budget.
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This included a reduction in tax-relief on pension contributions for those earning above £150,000, with employees earning over £180,000 receiving just the basic rate relief from April 2011. Whilst few will be affected by this change, it has much wider implications.
- Firstly is the generation of an extra £3 billion for the government as estimated by Watson and Wyatt, which apparently will not be used to help others achieve better pensions but instead go straight to the government coffers.
- Secondly is the much more worrying idea that the government is breaking one of the fundamental pension promises. Tax relief as compensation coevolved with pension schemes to reward those who deferred some of their income so they are less reliant in retirement. However, with this new policy, the government is eroding the principle of tax relief and it is unclear how far this could go!
Whether Yvette Cooper will prevent or help to further perpetrate undermining of pension promises is yet to be seen, however it's obvious that the Department for Work & Pensions requires stability and in these uncertain times this can't be guaranteed either.
Warm Regards,
Danielle Aw
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