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&#39More generous tax breaks and axe funding cap&#39

The Government should give employers more generous tax breaks and remove funding caps to their pensions as long as they contribute to employees&#39 schemes, says the Society of Pensions Consultants.

President Donald Duval, testifying before the select committee last week, told MPs that improved tax breaks for employees will not motivate them to save more as, in many cases, they cannot afford to do so.

But by giving employers greater tax advantages for contributing to occupational sch-emes, they will belong to the same pension as their employees rather than having their own separate arrangements.

Duval referred to the system in the US where, under the 401(k) rules, employers cannot make tax-free contributions to their own pensions unless they contribute to their workers&#39 schemes.

His arguments were supported by head of the pensions board at the Institute of Actuaries Peter Tompkins, who said encouraging employers to feel a sense of belonging to the pensions future of their employees would go a long way to solving the current problems.

The two were asked by committee member Labour MP James Purnell whether the Government would do better to redistribute the £14.4bn in annual pension tax relief.

Duval said: “The Government should give more to employers to keep them interested in the system. Tax relief for lower earners is sometimes irrelevant because they cannot afford to save any more.”


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