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Govt eyes pension tax relief reform to boost younger savers


The Government is considering reform to pension tax relief which would provide bigger incentives to save for younger workers rather than older savers.

The Times reports the Treasury is considering a policy proposal where the Government would offer different top-ups to pensions contributions based on the individual’s age.

Under the proposal, the Government would offer £1, minus a person’s age, for every £1 they pay into their pension. A 25-year old would receive a top-up of £75 for every £100 invested while a 60-year-old would get a top-of £40 for £100 saved.

The Treasury is also said to be looking at cutting the annual allowance from £40,000 to £20,000, as part of efforts to keep the costs down of the new system.

Hargreaves Lansdown has drawn up the proposal. In its document setting out the plans, Hargreaves says: “The younger you are when you invest, the more your savings are worth in the long run, so it makes sense for the government to load its incentives towards younger ages. A top-up which declines with every passing year presents an opportunity for a simple and relentless message from industry and government, to save now rather than putting it off until tomorrow.”

It is unlikely the plans will be approved before the Autumn Statement next month.

A Government source told the newspaper all tax reliefs were “under review”.

A statement from the Treasury says: “Responses to the pension tax relief consultation last year clearly showed there was no consensus for reform.

“The government concluded that with the lack of consensus and the rollout of automatic enrolment ongoing, now was not the right time to undertake fundamental reforms to the pension tax system.”



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There are 16 comments at the moment, we would love to hear your opinion too.

  1. Another tax saving con?

  2. Great idea, does that mean that the LTA will go? What about moving the ubiquitous age 75 pension benefit restrictons to 77, inline with the SP increase in age of receipt. ALso, are Life Company contracts going to be legislated so that there are no transfer or early receipt of benefits penalties? Whilst I’m on the subject of Life Companies, why are they all using 3rd party Customer Service outsourcers? Save a few pennies and provide little or no meaningful service. They mainly seem to use the ubiquitous Capita?

  3. Surely the older you are, the more you earn and the more of those earnings are disposable, so the more you can save for retirement. That was the basis of the relief structure for Chapter IV Part XIV Income & Corporation Taxes Act 1988. This “idea” would turn that completely on its head.

    • Correct, however who needs more encouragement? A 50 year old who has got retirement at the forefront of their mind, or a 20 year old who is ‘broke’ 2 weeks into their monthly pay check?

  4. What planet of simplicity are these people on!

  5. For someone in their mid 20’s such as myself I think this is a cracking idea. Unfortunately my generation seem to have little interest in saving for the future, and even though auto-enrolment forces people’s hand somewhat, will minimal contributions allow people to retire in 30 years time, independent of the state?

  6. Anything that gets younger people taking advantage ofpenson tax relief has to be a good thing. Obviously, the nuts and bolts are yet to be designed. In business, there is no such thing as a bad idea, just maybe bad timing. At least someone is thinking about a solution.

  7. How about they stop playing with the rules and wait for the confidence to come back. With the amount of meddling we’ve seen since the ironically named ‘Pension Simplification’ (A-day), incentives and over halls followed by U-turns, the word ‘Pension’ is becoming a joke!
    Tax incentives are all well and good, but with Ageism running right through the National minimum wage bands, poor youngster don’t have enough to live on, let alone the ability to make use of these incentives to save.


  9. I was at that Fringe Meeting and I did not get the impression that John Glen was speaking for the Treasury! Perhaps the idea of Katie Smith that you could pay off your student loan into your pension is the most imaginative!

    I love the idea that giving kids more tax relief, we owe ourselves a get out of the LTA card – free!

  10. Charles Blackwell 12th October 2016 at 3:35 pm

    A statement from the Treasury says: “Responses to the pension tax relief consultation last year clearly showed there was no consensus for reform.

    “The government concluded that with the lack of consensus and the rollout of automatic enrolment ongoing, now was not the right time to undertake fundamental reforms to the pension tax system.”
    So the Headline on this article is complete nonsense ………..

  11. The only sensible reaction to this would be to call for the resignation of the muppet who thought up this ‘idea’. Yet another cunning plan to make pensions even more complicated than they are already. Here’s an alternative suggestion – the first party that genuinely simplifies pensions (or indeed ANY form of saving) gets my vote. My breath is unheld!

  12. The Annual Allowance is grossly unfair. By all means retain the Lifetime Allowance – set it a lower level even but, once you have that, what is the point of the AA? Why should people not be allowed to work towards the LTA in whichever pattern they like?
    It’s a penal allowance and should be abolished immediately

  13. Yet again it shows how out of touch Westminster really is.
    One can safely presume that the young have considerable debts, not least thanks to Government policy. They have debts of £30k + after leaving University. By the time they get to around 30 they may be married or cohabiting and trying to buy their first property with a mortgage – more debt. Where does the Government think these people are going to find the money to put into pensions? Surely it is far better advice to get these people to discharge their debts as soon as they can. This will probably mean that for the most responsible that they may possibly be debt free by the time they are around 50 (at best). This is the time when they will have most to spare to save for their retirement – with the least incentive.
    Of course the government would rather they stayed in debt for as long as possible because that is what I economy relies upon. Our politicians certainly don’t lead by example (or maybe they do!) as Britain’s short term debt is the highest of any rated country.

  14. Agree with Harry, the politicians are out of touch with most people, and do not lead by example. We cannot afford to pay the unbelievably generous pensions to them and also the other state funded pension schemes. Most of these are not funded and the liability is on top of the national debt.

    The next few generations are not going to like the legacy left to them. In addition the younger voters wanted to stay in the EU, but this seems to have been forgotten.

  15. It’s brilliant (for the Exchequer, that is). The young have so little spare cash they can’t out much into pensions anyway. Older people can pay more in and that will attract the least relief.

    Thus, the Government ‘looks’ to be acting generously but without it actually costing anything

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