Brexit and pensions

pensions1

People depending on investments to fund old age are facing another year of Brexit uncertainty, after a mixed period for UK markets in 2019.

A decisive election result cleared our path to leaving the European Union, but with trade deals yet to be struck with either the EU or the US our future fortunes are still not assured.

The newly re-elected government now has a majority that gives it the opportunity to fix pension problems that disadvantage low paid workers and parents who fall foul of confusing child benefit rules. Here’s what you need to know:

  • Pension investors: Brexit comeback for UK markets

Last year, many pundits said the UK market was undervalued and might be heading for big gains in the year of Brexit.

  • Pension tax relief: Fix for doctors could spark radical reform for all

The Government has just come out with a one-year fix for the so-called ‘taper problem’, which sees doctors turn down shifts for fear of shock pension tax bills, and it has promised urgent talks with the medical profession to solve the matter.

But it has fallen short of saying it will abolish the taper, which pension experts believe is the only viable remedy. Commentators believe there is a need for a radical overhaul of the pension tax relief system for everyone, not just the best-paid workers. The Government now has a comfortable majority, and if strapped for cash it may be tempted to dust off George

Osborne’s old plans, shelved just ahead of the Brexit referendum, to axe pension tax relief and introduce a Pension Isa. Introducing a Pension Isa would mean savers no longer receive tax relief on contributions to a pension. Instead it would pay out tax free in retirement, providing a future Government didn’t slap penalties back on later.

The other option that could be on the table is a new flat rate of tax relief on contributions, probably of between 25% and 33%. This would see lower earners taxed at the basic rate of 20% get an extra Government boost to their pots at the outset – and see the value of their pensions rise as a result – while those on 40 or 45% wouldn’t get back their full whack of tax any longer.