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Govt says axing 40% relief is &#39feverish speculation&#39

The Government has angrily denied that it plans to scrap the 40 per cent upper tax relief on pension contributions for higher-earners after being challenged by the Conservatives.

In a heated exchange in Parliament this week, Shadow Secretary of State for Work and Pensions David Willetts demanded to know whether Secretary of State Andrew Smith supported the idea of removing the higher relief.

Smith replied: “We do not have such plans. Ministers have taken no decisions of the sort suggested, it is all feverish speculation.”

In what was believed to be an idea floated in advance of next month&#39s pension Green Paper, there has been increasing speculation during the last week that the Government was considering removing the tax break for upper-rate taxpayers.

Willetts accused Smith of trying to invent another “stealth tax” and he said it was a “very bad idea at a time when the Government is trying to encourage people to save for their retirement.”

People earning over £34,000 can claim 40 per cent tax relief on pension contributions while those on lower salaries get 22 per cent.

The idea to scrap the tax break was floated by Downing Street pensions adviser Ros Altman. Altman says: “I hope more incentives for pensions or better incentives for pensions will be outlined in next month&#39s Green Paper.”

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