Legal & General has warned the major political parties against scrapping higher rate tax relief on pensions, claiming the looming restriction for top earners has already halved pension sales for the first quarter.
The Liberal Democrats have a manifesto pledge to limit tax relief on pension contributions to 20 per cent for everybody, irrespective of taxpaying rate.
L&G wealth & policy director Adrian Boulding warns Labour and the Conservatives against agreeing to this policy in the event of a hung Parliament.
He says pension sales through IFAs are likely to be 50 per cent down this quarter compared with the same period last year.
He says: “The Liberal Democrats want to do away with higher-rate tax relief altogether I hope the politicians look at the figures in terms of what has happened to pension sales since the restriction to tax relief for high-earners was announced.
“Sales in those income brackets have been significantly dented. The official figures have not been released yet but we expect new pensions being written by IFAs to have fallen by as much as 50 per cent in the first quarter, industrywide.
“That is a very big reduction. Whoever is in bed with the LibDems should say no to this because we can see the damage it has done to higher-earners and we do not want to see that repeated in the case of all 40 per cent taxpayers.”
Boulding also criticises Labour and the Tories for agreeing to link the basic state pension to earnings. Previously, the state pension was linked to the higher of earnings or prices, which is the LibDem policy. He says: “The main parties have overlooked a very important point and might find that in a few years there is another campaign to change the link back to prices.”