The Inland Revenue's proposal for a £1.4m lifetime fund limit linked to prices has come under fire from across the pension industry as its tax simplification consultation closes.
Norwich Union says it is nonsense to base the lifetime limit on the value of the fund at retirement rather than on contributions as this will penalise good fund performance.
The National Association of Pension Funds is calling for the lifetime limit to be scrapped as it risks alienating senior management from company schemes and undermining occupational provision.
The Association of Consulting Actuaries says the limit should start at £1.7m if it is to truly reflect the earnings' cap and should be linked to wage inflation rather than prices.
Consultancy Mercer claims the plan will hit 290,000 people immediately rather than the 5,000 estimated by the Revenue. It believes this will increase to 580,000 in 15 years if the limit is tied to price inflation.
The ABI says the Revenue's approach introduces a new cliff-edge in retirement by restricting money-back guarantees on annuities to people under 75.
NAPF chief executive Christine Farnish says: “We urge the Inland Revenue to remove the proposed £1.4m lifetime limit, which threatens to alienate company executives from the occupational pension schemes for which they are responsible.”