Speaking at International Adviser’s International Portfolio Bond Forum in Bristol on Wednesday, Gilmartin said he had heard rumours that the current LTA cap maybe reduced from £1m ($1.24m, €1.18m) to £750,000 by chancellor Philip Hammond in the UK’s last ever Spring Budget on 8 March.
He added that the UK government may also introduce a flat rate of pension tax relief.
“There’s a rumour that the lifetime allowance (LTA) will be reduced to £750,000 – other potential changes are a flat rate tax relief system which would be simple to administer and much more cost effective,” he told an audience of shocked financial advisers.
The LTA, which caps the amount of money people can save tax-free into a pension over their lifetime, has already been slashed three times in five years, going from £1.8m in 2011 to £1m in April 2016.
Meanwhile, a flat rate tax for all pension contributions was initially proposed by former chancellor George Osborne in the run up to last year’s Spring Budget. It was abandoned amid mounting pressure from members of his own party.
Former pensions ministers Ros Altmann and Steve Webb have both urged the government to bring in a flat rate for pension tax relief, arguing that it favours the wealthy while discriminating against Britain’s lowest earners.
Gilmartin, a chartered financial planner and fellow of two industry bodies, added that countries such as Latvia, Estonia and Russia already run a tax system which applies a flat rate across all taxes.
“The simplicity is key. You won’t get just the fat cats benefitting, everyone will,” he said.
Populist uprising
Also speaking at the event, Simon Gould, the founder and director of another IFA firm in Bristol, Gould Financial Planning, agreed that the UK maybe looking to cut pension tax relief, which traditionally favours high earners.
He explained that this may be driven by the uprising of populist governments around the world and the backlash after the Panama Paper leak last April, when around 11.5 million documents were leaked revealing the how the rich and powerful use offshore companies to avoid paying tax.
“Mossack Fonseca has left a scar. With the rise of populist governments, i.e. Trump and Marine Le Pen, governments are going to take populist views even if they are over the top.
“I wouldn’t be surprised to see higher rate tax relief for higher earnings.
“This idea that the wealthy can look after themselves and to hell with everyone else means people are voting out those governments and I’m expecting some of the gravy train stuff to be removed,” he said.
