Government plans to overhaul tax incentives risk a “pensions implosion” that could undermining saving in the UK, the National Association of Pension Funds has warned.
Policymakers are considering options to radically reform pension tax relief. One option being considered by Chancellor George Osborne would see pensions taxed in a similar way to Isas, with savers subject to tax on contributions rather than withdrawals.
The Treasury could also introduce a flat rate of pension tax relief, tweak existing annual and lifetime allowance limits, or leave the system as it is.
Speaking at the NAPF annual conference in Manchester today, NAPF chairman Ruston Smith accused the Government of having an “ulterior motive” for pursuing reform – raising short-term tax revenues.
He added: “If the Government gets its way on reforms to pension tax relief we could see the recent wave of change with the pensions revolution becoming a pensions implosion.
“Tax change that could literally dig up and smash the foundations is set to create a society of lifetime savers, putting pressure back on our ageing society.”