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Labour pension plans will ‘undermine confidence’

All three major political parties are likely to tinker with pension tax relief

2 March 2015

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Ed Miliband has announced that the labour party would cut the tax relief for top rate tax payers from 40 per cent to 20 per cent.

Miliband also said that the party would cut the lifetime allowance from £1.25m to £1m, while annual allowances would be reduced from £40,000 to £30,000.

The Labour party leader said in his speech at the Leeds College of Music that the changes were necessary in order to reduce tuition fees from £9,000 to £6,000

Joanne Segars, the chief executive of the National Association of Pension Funds (NAPF) commented: "This is not an issue on which any future government can afford to make knee-jerk policy decisions upon.

"We need a proper debate on tax in the broader context of pensions and retirement savings, and this should be overseen by an Independent Retirement Savings Commission to ensure the long-term needs of savers remain at the very heart of the Government's approach."

Currently those who have an income of over £150,000 per annum receive a 20 per cent tax relief from the government, as well as a further 20-25 per cent relief through their tax return.

A popular political lever

The Liberal Democrats have also suggested that they might make changes to pension tax relief.

They propose a flat rate of 30 per cent to be paid by every tax payer, which would be an increase for basic rate tax payers and a fall for top-rate tax payers.

The current coalition government has already cut the annual allowance from £255,000 to £40,000, and lifetime allowance has been reduced from £1.8m to £1.25m.

Segars added: "These incremental shifts in pension tax policy are not the right way to manage the future retirement savings of millions in the UK. Such a move by any government threatens to undermine the confidence of pension savers, employers and schemes alike.

"These changes are likely to affect many middle-income savers, such as senior nurses and senior teachers."

 

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Pensions