The ABI is writing to members of its pensions forum market regulation committee compliance panel urging them to lobby the Government over protecting high earners' pension contributions from the effects of inflation.
Under the new pension framework introduced in April, the Inland Revenue does not intend to allow the cap on net relevant earnings to keep pace with inflation as earnings increase. This means that policyholder contributions are fixed for five years on net relevant earnings at outset. Even if that NRE figure exceeds the earnings' cap in latter years, contributions for the next five years will still be restricted by the basis year of the earnings' cap.
The alternative to this is nominating the latest year as the basis year to get round the impact of inflation if the member earns more but the ABI says this presents more of an admin burden to its members.
The letter states: “The ABI's argument is that in view of the policy intention of simplification, the Revenue should allow for updating in line with the earnings cap.”
A life office spokesman says: “It would be a good idea for the Revenue to reconsider the inconsistent approach.”