The chair of the work and pensions select committee has called for higher-rate pension tax relief to be scrapped.
In an interview with Money Marketing, Labour MP Anne Begg says the move would be preferable to the Government’s plan to cut the annual pension allowance from £255,000 to £50,000 while keeping tax relief at the full marginal rate of up to 50 per cent.
Aberdeen South MP Begg says the call is a personal view and does not necessarily reflect the opinion of the committee.
She says: “In light of the economic situation, should we have been looking at you only get tax relief at a basic rate? Yes, we probably should have been. That probably would have been a more understandable way of dealing with it rather than trying to cap what goes into the pension pot.”
Begg also warned that a single universal pension of the type proposed this week risks alienating people who would have received more through a combination of state pension payments.
She says: “Unless you tie the middle classes into a welfare system, then why should they pay for it? There is a superficial attractiveness of this single pension but I am not sure people are ready to give up the idea of the contributory principle.”
Pension Transfer Solutions managing director Carl Melvin says her comments are likely to be politically motivated and ignore the fact that many people would pay higher-rate tax when they get their pension. He says: “Does she have any evidence to demonstrate this would be a better option? I suspect she has not.”