Former pensions minister Steve Webb believes Chancellor George Osborne risks “incalculable damage” to savers if he overhauls pension tax relief in the upcoming Budget.
In a speech at the Association of Consulting Actuaries, Royal London director of policy Webb will compare a move to the taxed-exempt-exempt model of pension taxation to Gordon Brown’s raid on occupational schemes.
Webb will say: “The legacy of that damaging change is still being felt today, and the former Chancellor’s [Brown’s] name is forever associated with that measure.
“There is a real danger that with the ‘pensions Isa’ history could repeat itself.”
Webb will use his speech to highlight the likely need to run parallel tax schemes for decades, as well as reducing the incentive to spread pension withdrawals over a longer period if we move from the current tax system.
The former Liberal Democrat minister will also say confidence in long-term savings would be shattered by the dramatic changes.
He will add: “Abolishing tax relief on pension contributions would certainly raise large sums for the Chancellor, even if some of the proceeds were given back as a Government top-up into pension pots.
“But the damage done to pension saving would be incalculable, as pensions are once again seen as a convenient pot for cash-strapped chancellors.”