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Liberal Democrats set out pensions tax relief reform plans

The Liberal Democrats will consider introducing a single rate of pensions tax relief of above 20 per cent if they win next May’s general election.

The pledge is included in a draft of the party’s manifesto, published this morning, which Liberal Democrat leader and deputy Prime Minister Nick Clegg has a described as a “manifesto for the next generation”.

It says: ”[We will] establish a review to consider the case for, and practical implications of, introducing a single rate of tax relief for pensions, which would be designed to be simpler and fairer and which would be set more generously than the current 20 per cent basic rate relief.”

In May, pensions minister Steve Webb told Money Marketing he would like to see a single rate of somewhere below 30 per cent introduced, adding that he still needed to convince his party that the move is a good idea.

The document also commits the LibDems to continuing with the new pension flexibility rules announced at the Budget.

The party also proposes establishing a Regulation Advisory Board to reduce uncertainty and remove unnecessary regulation.

It says: “[We will] establish a new Regulation Advisory Board to reduce regulatory uncertainty and remove unnecessary business regulation. We understand that well-designed regulation has a vital role in creating markets and driving investment and will use it, in particular, to promote low-carbon and resource-efficient innovation.”

While the document does not clarify whether this will apply to financial services, the document is only a draft and the party says it wants feedback on the proposals.

It also confirms plans for:

  • a ‘mansion tax’ on homes worth more than £2m
  • to maintain the pensions triple lock so payments rise in line with earnings, inflation or by 2.5 per cent, whichever is highest
  • to raise the income tax personal threshold to £12,500
  • to reduce the lifetime pension tax allowance from £1.25m to £1m
  • to eradicate the deficit by 2017/18 and reduce national debt as a proportion of GDP “in a way that is fair”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. I assume therefore they have found a way to ensure that all employer contributions will be correctly assessed and any higher rate tax payer receiving an employer contribution be taxed on the value of that benefit accordingly.

    This will no doubt encompass a fair and true method of valuing DB accrual

    Or will those benefiting from substantial support from employers (MPs/ Civil servants for example) into their savings be allowed to get away with absolute murder?

    Answers on a postcard…….

  2. “•to reduce the lifetime pension tax allowance from £1.25m to £1m”

    It’s just laughable. There is simply no justification for this with an AA as low as £40,000. All it does is widen the gap between the public and private sector and make planning impossible.

    Good job then that these muppets will jnot get a seat after the next election, let alone another glimpse of power!

  3. Frankly they may as well say anything they like, there is little chance of a LibDem Government, though if this is an indication of the direction of travel of political thinking, we look set for argument around tax relief, lifetime allowance and regulation… (so no change there) and a plan to continue the national overspending until 2017/18 before attempting to reduce the national debt. Quite how any politician thinks that reducing or even having the lifetime allowance avoids further complexity is beyond me and for some reason the LibDems seem to think we need another regulator…

  4. Its a good job Clegg is a multi millionaire as it will not affect him or for that matter most of the government. People don’t save now enough for retirement what incentive will there be under Clegg and his cronies

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