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Treasury orders review of pension taxation

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The Office of Tax Simplification will review the pensioner tax system as the Treasury looks to simplify the pensions tax regime.

In a letter to Treasury exchequer secretary David Gauke last month, OTS chairman Michael Jack said: “For the estimated 5.6m people of pensionable age paying tax, this area is widely acknowledged as causing too many problems for a group, some of whom are the least able to cope with them.

“The OTS will be looking for ways in which pensioners’ tax affairs can be dealt with in a much more straightforward way - especially for those with multiple sources of income.”

Gauke has now ordered the OTS to carry out a review of pensioner taxation. However, this will not include inheritance tax or tax relief on pension contributions.

In a letter to Jack, Gauke says: “I would like the OTS to carry out a review which identifies and examines which parts of the tax system cause the most complexity for pensioners, looks at how this varies across the pensioner population, and proposes ways to make their tax affairs simpler.

“I look forward to an interim report on these issues ahead of the Budget 2012, and a final report with policy recommendations later in the year.”

The review will look at the areas of the tax system which cause the most complexity and uncertainty for pensioners; identify how these issues vary within the pensioner population; and explore what changes could achieve simplification and what the wider implications of these might be.

The OTS will also look into complexities around employee share schemes.

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