HELP NEEDED ON PENSIONS

Former pensions minister Steve Webb is calling on the Government to relax rules around pension contributions.

He says two groups of savers will be hit particularly hard during the current situation and should be given a helping hand when the crisis is over.

This would remove a barrier and mean people can rebuild their pots to a sustainable level.

The people affected include those aged 55 or over who need to access their pension pots for emergency cash to tide them over. And people whose pension investments have fallen substantially, especially those who are already in, say, a drawdown plan where their pot remains invested and at risk from volatile markets.

These two groups may be looking to rebuild their savings in months and years to come. But, if they have taken taxable cash from their drawdown pot or a defined contribution pension, under the pension freedoms, they will be hit by a strict limit on how much they can put away in the future.

Under the rules of the Money Purchase Annual Allowance they are limited to £4,000 a year in contributions on which pension tax relief can be claimed.

Steve Webb is calling for that to be lifted, at least to the £10,000 cap which applied when these rules were first introduced.

Now a partner with pension consultants LCP, he said: “Pension savings could be severely dented. Once the present crisis is over some people will be in a position to start building up their pension again, especially if they are still in work.

“The government must support people in this rather than put barriers in place.”