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Napf plea to MPs to rethink pension tax

The National Association of Pension Funds has written to MPs to urge them to rethink the pension tax changes announced in the Budget, saying they will have a negative impact on pension savings.

It says that although these proposals are aimed at the UK’s 230,000 highest-earners, the impact is likely to be felt by more modest-earners in the medium term.

The Napf is concerned that, having broken the principle on which pensions have been based for higher-earners, there is a risk that future Governments will make the same changes for lower-earners.

It says the proposals break the tax simplification framework introduced by the Government in 2006 and that constant changes to legislation can do nothing but undermine scheme sponsor confidence in pensions.

The association also expressed doubts that the Budget measures will raise the 3.1bn in additional tax revenue HM Treasury predicts as individuals seek more tax-efficient ways to save and companies look to new ways to reward higher paid staff.

Napf chief executive Joanne Segars says: “The Budget changes send out the wrong messages on pension saving.

“The Government must think again about the wider impact of the new measures as the changes are likely to affect more than just top-rate taxpayers.

She adds: “The Government’s proposals break a long-established principle tax policy in this country and the constant instability in legislation does nothing to help rebuild badly needed confidence in pensions.”

Last month, the Treasury select committee called on the Government to monitor the effect of the removal of tax relief on pension contributions for high-earners and consider an alternative if it has a negative impact on pension savings.

In its Budget report, the select committee said the Treasury should consider introducing a cap on annual contributions as an alternative to the tax relief move.

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