Labour is calling for a wide-ranging review into the impact of pension freedoms next year with a focus on potential tax avoidance and the impact on annuities.
In an amendment to the Taxation of Pensions Bill, published yesterday, shadow Treasury financial secretary Cathy Jamieson calls for a “comprehensive” review of the reforms within six months of the bill gaining Royal Assent, expected early next year.
Labour wants to examine the impact of reforms to the public purse, with a particular focus on potential tax avoidance through salary sacrifice.
The reforms create a tax loophole as savers could use pension salary sacrifice to avoid paying employer and employee national insurance, as well as collecting tax relief on their contributions. They will then be able to immediately withdraw the money from their pension pot, subject to marginal rates, without ever having paid NI or income tax.
In addition, Labour wants the Treasury to consider the impact on the purchase of annuities, as well as which income groups benefit most and how behaviour has changed.
The amendment states: ”The Chancellor of the Exchequer shall, within six months of this act receiving Royal Assent, publish and lay before the House of Commons a comprehensive review of the impact of the changes made by this act.”
In a separate amendment Labour also calls on the Treasury to publish its previous research into how the reforms will change behaviour, affect different income groups and the financial risk.