Potential tax relief changes are lauded
Published 23/06/2010 | 08:00
Pensions groups have welcomed the news that the Government is considering scrapping plans to limit tax relief on pensions for high earners.
The previous government had planned to reduce the amount of tax relief people earning more than £150,000 qualified for from April next year.
But Chancellor George Osborne said the Government would consult on other ways to save money on pension contributions for high earners, such as by limiting the annual amount people can save into a pension.
It is thought that reducing the current annual allowance of £255,000 to between £30,000 to £45,000 would produce a similar saving for the Treasury as the £3.5bn that would be saved through reducing pensions tax relief for people earning more than £150,000. It would also be much simpler to administer.
Joanne Segars, chief executive of the National Association of Pension Funds, said: "We are pleased the Chancellor has listened to our argument for a much simpler and more radical solution. The previous government's proposals would have been very damaging to the pensions of all working people, not just the well-off.
"Reducing the amount that can be paid into a pension tax-free each year will protect the Treasury's tax take, but will be much more supportive to pensions saving and less costly to implement."
The Government also announced a consultation on ending the rules under which people have to use their pension fund to buy an annuity by the time they are 75.