A group of 40 Conservative MPs are proposing a major overhaul of the “rotten” pensions industry including the abolition of higher rate tax relief and tax-free lump sums as part of a “moderate manifesto” for the next election campaign.
In a wide-ranging report, the Forty Group paper, authored by MPs James Morris and David Mowat, also calls for auto enrolment to be scrapped for firms with less than 10 staff.
Prime minister David Cameron praised the “welcome contribution” to Conservative party policy debate.
The money raised from ending reliefs, an estimated £10bn, would be used to provide an 10 per cent uplift to every pension pot when an annuity is purchased.
The MPs’ report also criticises high charges in the pensions industry and wants more shopping around for annuities, claiming there is “market failure”.
It wants all retirees to get at least three annuity quotes from life companies and a standardised set of pension products to ensure comparability.
Hargreaves Lansdown head of pensions research Tom McPhail says: “These issues need to be taken seriously but this is not the right time to do it. In the middle of auto-enrolment it would be reckless and destabilising. It should be considered as part of a 2017 review.”