Applying a tax charge of 55 per cent on unused pension assets on death will put people off saving, according to pension advisers.
Intelligent Pensions managing director Steve Patterson says the current proposals to reform the age 75 annuitisation rules would see the Government “shoot itself in the foot”.
He says: “The new Government is obviously trying to simplify things but simplicity without fairness would be counter-productive. Applying a 55 per cent tax charge to money that might only have suffered basic-rate tax or even less when paid as income will not encourage people to save for their retirement.”
A survey of advisers conducted by AJ Bell also shows adviser opposition to the proposed tax changes.
Marketing director Billy Mackay says pension savers and advisers both view a tax of 55 per cent on crystallised funds, while no tax is paid on uncrystallised funds, as unfair.
He says savers favour a uniform tax rate of 25 per cent on all savings, regardless of age or whether income has started to be withdrawn, while advisers favour a staged approach of 0 per cent on uncrystallised funds, 35 per cent on drawdown funds before age 75 and 55 per cent on funds where death occurs after age 75.