Legal and General chief executive Nigel Wilson says pensions tax relief for high earners must be addressed in future pension reforms, describing it as a “system designed by the rich, for the rich.”
Writing in London paper City AM this morning, Wilson says: “In pensions, a regressive system of tax relief at the marginal rate gives an over-generous subsidy – 70 per cent, or £25bn out of the £35bn paid in pensions tax relief goes to higher-rate tax payers. This is a system designed by the rich, for the rich, and will have to change in the next wave of pensions reforms.”
The claim forms one of a number of suggestions Wilson argues should be applied to an overhaul of public spending on welfare in order to replace universal means-testing with a ‘contributory principle’.
Wilson also argues the “plumbing” put in place through auto-enrolment should be used by government to administer a new system of welfare top-up.
He says: “We need to consider how to use the plumbing that has been put in place for auto-enrolment. Systems which connect every employer in the country to a pensions provider will soon be in place.
“The can easily be adapted to accommodate welfare top-ups, avoiding the usual IT problems encountered by government projects.”
Wilson argues auto-enrolment systems should be used to support “contributory welfare top-ups” encouraging individuals to share long-term illness and disability risks with the state.
He says reforms need to “combine a fair state National Insurance system, which provides an underpin, with an enhanced and suitably incentivised top-up, which can be through public or private sector”.