Trade bodies, academics and industry experts have urged Chancellor George Osborne to steer clear of further reforms to higher-rate pension tax relief in the Budget next week.
Reports suggest ministers are considering reducing the annual allowance for tax-privileged pension saving from £50,000 to £40,000, which would save the Treasury around £600m. There are also fears that higher-rate relief could be axed altogether, potentially saving £5bn to £7bn.
Association of British Insurers director-general Otto Thoresen says: “Changing tax relief would be a stealth double-tax equal to the infamous Gordon Brown raid that caused so much damage to this country’s savings culture. There can be no justification for double-taxing responsible savers who are attempting to provide for their future.
“In opposition, George Osborne repeatedly stressed he would be a pro-savings Chancellor. At this very difficult time for savers, he needs to live up to his promises and resist the temptation to view pensions as an easy, short-term hit.”
Institute for Fiscal Studies director Paul Johnson says: “If the Government cuts the annual allowance again, a year after reducing it from £255,000 to £50,000, it will show a complete lack of long-term planning. It is simply not a good way to run a pension system. If the Chancellor wants to make a principled change to raise more money, he could look at the treatment of employer contributions for National Insurance because at the moment they go in free of NI and come out free of NI.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “The Government should commit to leaving pension taxation alone for the next 10 years and call on the opposition to do the same.
“Political tinkering undermines people’s trust in pensions and their willingness to save for the long term.”