The Government intends to issue a consultation paper alongside the Green Paper containing radical proposals to simplify the taxation of pensions.
This will be a key document. At present there are 8 different tax regimes for pensions with further different rules covering contributions and benefits within those regimes. This not only creates confusion among employers, employees and practitioners alike but also considerable additional administration.
While everyone agrees there is a need for simplification most previous attempts have only overlaid a new pension regime on top of existing benefits. This has only added to confusion by creating a further regime. A radical approach would be to move all benefits/contributions to the basis of a new regime and to abolish all earlier regimes. However, if this route is followed, many members with favourable existing scheme benefits may lose out and charges of retrospection will be made. It will be interesting to see how radical the proposals are.