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Pension cap could turn away savers

Mounting a defence of people with pension pots likely to exceed £1.4m in the court of public opinion is not an easy task.

These well-off and presumably dedicated savers stand to lose from the Pensions Green Paper but there is an escalating row over how many of them there are.

The Treasury is wedded to its original assertion that it will catch only 5,000 personal pension savers. Pension consultants, IFAs and most pension providers put the number closer to 100,000.

This is not the only dispute. Standard Life argues that if the Revenue pursues plans to tie this limit to prices rather than earnings then between 5 and 10 per cent of the population will have to change their retirement planning to avoid the £1.4m limit. The tax hit above this level is a punitive 60 per cent.

The argument is not only whether £1.4m represents a reasonable cut-off point but also whether it is reasonable for the Revenue to take an increasing amount of money from those retiring over time.

Few would argue that the Government is correct to concentrate on helping the less well off. At the other end of the earnings&#39 scale, the public perception that fat cats are creaming off an unfair share of pension cash is probably accurate. But perhaps this only affects the top executives.

We have always argued that taxation is the Government&#39s business and ultimately that of the electorate. But if Standard is correct, the Government risks alienating the UK&#39s managerial and professional classes from the pension system.

Other countries have successfully offered incentives to executives through their own pensions to encourage their workforces to save. It would be a shame if this reform did the reverse.

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