The Government is considering scrapping higher-rate pension tax relief, according to a report in the Sunday Telegraph.
Scrapping higher-rate relief was advocated by the Liberal Democrats before the general election and was considered by the Government before it decided to cut the annual allowance from £255,000 to £50,000 instead.
The report suggests Chancellor George Osborne is looking again at cutting higher-rate relief as he struggles to cut back the public purse.
Scrapping higher-rate relief could save the Government £7bn each year.
The Sunday Telegraph suggests some Conservative MPs believe scrapping higher-rate relief could be the first step of a radical plan to cut all pension tax relief, except on employer contributions, saving the Government £22bn annually. It suggests some of this saving could be used to boost the basic state pension.
The paper says a growing number of Conservative MPs believe the Government may U-turn on plans to scrap child benefit payments to couples with at least one higher-rate taxpayer, meaning cost savings were needed elsewhere.
Writing in the same newspaper, Michael Johnson, who worked as an adviser to the Conservative’s 2007 economic competitiveness review, argues it is time to scrap higher-rate tax relief and the 25 per cent tax-free lump sum payment and merge the Isa and pension regimes with a single annual allowance of around £40,000.