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The Government has launched a six-week consultation that closes on April 22, following a request from the UK Statistics Authority to update the measure of inflation that is widely used
throughout the UK. This would see a huge move away from the preferred measure of the Retail Price Index (RPI) to a variant of the Consumer Prices Index (CPI), which includes owner-occupiers
housing costs. CPI is typically one percent lower than the RPI due to the way the two indices are calculated, meaning switching to the lower measure would significantly reduce the amount of
income that members of “final salary” pension schemes receive during their lives. When Britons retire, they would expect to see their pensions pot grow in line with inflation. But the change
to CPI would see this growth rate fall by one percent, with the impact being hugely damaging over a longer period of time. The inflation measure change was not due to happen until 2030, but
the Government is now considering accelerating these plans and bringing them forward to 2025. Jeremy Rideau, of investment firm State Street said pension savers could lose one percentage
point over a 15-20 year period. This would mean the value of benefits linked to RPI could plummet by up to 15 percentage points. Jos Vermeulen, of fund house Insight Investment, warned Rishi
Sunak will think he has “got away with it” if people don’t complain about the proposed inflation overhaul. He said: “This issue is flying under the radar, perhaps because its apparent
complexity is preventing it from being treated with the proper scrutiny it deserves. “The Government stands to make a gain from the change in measure, as it would result in a wealth transfer
of between £90 and £120billion from holders of index-linked gilts, which are predominantly British pension funds, and the Government which pays them. READ MORE: UK PROPERTY: WHAT WAS IN
BUDGET 2020 FOR HOMEOWNERS, BUYERS & SELLERS? But the Chancellor did announce the threshold allowance for pensions tax relief will increase from £110,000 to £200,000. Currently, people
earning more than £110,000 would see their tax-free allowance on their pension contributions fall from £40,000 to £10,000. But from next month, anyone with an income of £200,000 or less
won’t be hit by the annual allowance tapering. Britons earning £200,000 who has received a pension contribution from their employer of £40,000 will not incur pension tax charges, which
contrasts with a tax penalty of around £13,000 under current rules. The measure is expected to cost the Treasury more than £2billion over the next five years and is aimed at relieving
increasing pressure in the NHS. Thousands of top doctors have been turning down additional shifts to as they fear being hit with unexpected tax bills for mistakenly breaching their reduced
pension savings limit. Svenja Keller, head of wealth planning at Killik & Co, said “The change to pension rules for doctors – with more clarity and support for their Annual Allowance
conundrum – is great news and, at long last, should be a significant boost to frontline healthcare. “That said, by trying to help NHS doctors the increase in allowance threshold is now
applicable to everyone. “Why not just abolish it? This would have brought far more simplicity and the threshold is now so high that it will take many out of the tapering regime regardless.”