Advisers have welcomed the Government’s decision to review the pensioner tax system as the Treasury continues its drive to simplify pensions.
This week, the Treasury ann-ounced that the Office of Tax Simplification will look at potential reforms to pensioner taxes after OTS chairman Michael Jack wrote to Treasury exchequer David Gauke outlining concerns about the current system.
The review will look into 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. However, the OTS’ remit will not include inheritance tax or tax relief on pension contributions.
Informed Choice managing director Martin Bamford says: “I certainly welcome this ann-ouncement. The current system is incredibly complex and cau-ses all sorts of problems for pensioners. The queries we get about tax problems tend to be from pensioners simply because they are more likely to have multiple streams of pension income combined with investment income and possibly a salary.”
Pension Transfer Solutions managing director Carl Melvin says: “Any effort to simplify the tax system for pensioners has to be good news because at the moment we have one of the most complex tax systems in the world.”
The Treasury has also issued a separate call for evidence on the potential integration of National Insurance contributions and income tax.
In the call for evidence, published on Monday, Gauke says: “For decades, we have operated income tax and NICs as two fundamentally different systems with different periods and bases of charge. We believe that the greater integration of the two systems has the potential to remove economic distortions, reduce burdens on business and improve fairness across individual earners.”