Standard Life head of pensions policy John Lawson says the cost-saving calculations behind Labour’s proposed new pension tax relief restriction are flawed.
Shadow Chancellor Ed Balls wants the maximum relief offered to those earning over £150,000 lowered to 26 per cent.
The previous Labour administration planned to limit pension tax relief for people earning over £150,000, including pension contributions, to 20 per cent from April 2011.
Chancellor George Osborne instead cut the annual allowance from £255,000 to £50,000 and the lifetime allowance from £1.8m to £1.5m.
Balls claims Labour’s restrictions would have saved £4bn compared with the £2.4bn saving from reducing allowances. He says his new restriction would save another £1.6bn.
Lawson says Balls’ figures for the cost savings associated with Labour’s original plans do not account for Government, employer, employee and pension scheme costs totalling between £2bn and £3bn.
He adds the £20,000 cap on annual allowances for top-earners in 2009/10 and 2010/ 11 created pent-up demand to carry forward contributions and reduced the initial savings from the annual allowance cap.
Lawson says the £2.4bn saving will be nearer the Treasury’s estimated annual saving of £4.5bn in future years.
He says: “Labour’s inefficient plan was already discredited last time round and it looks like they are putting it back on the table. They do not seem to have been listening.”
Labour were unavailable for further comment.