Think tank moots flat-rate pension tax relief

Tax-Taxation-Blocks-700.jpgThe government should set pension tax relief at 28 per cent to make the retirement system fairer and help millennials save for later life, according to a think tank.

In a report published today, the Resolution Foundation also proposes capping tax-free cash at £40,000 and the state pension triple-lock to be replaced by a double-lock.

It says the auto-enrolment earnings trigger should be reduced to £6,000 and £10,000 should be given to every person from age 25 to help them buy a house or fund a pension.

While the study notes auto-enrolment has boosted pension saving it also says working age adults bear risks their predecessors in defined benefit schemes were protected from.

Figures published by the Office for National Statistics today show the proportion of employees who contribute to a workplace pension has increased by almost a quarter as a result of auto-enrolment.

Around 73 per cent of UK employees had an active workplace pension scheme in 2017, up from less than 47 per cent in 2012.

AJ Bell senior analyst Tom Selby says: “There would be significant complexities to overcome in establishing a flat-rate of pension tax relief, particularly in relation to DB pensions.

“Furthermore, any move to cap tax–free cash would need to be fair to those who have already contributed to a pension based on the rules of the existing system.

“It is also critical any attempts to address intergenerational fairness through the pension system do not inadvertently damage incentives to save in the UK.”

Hargreaves Lansdown head of policy Tom McPhail adds: “This is a very mixed bag of reform proposals, some of which make a great deal of sense. Given the current government’s limited capacity to act, very little is likely to be implemented during this parliament.”



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  1. Oh Lordy. The Resolution Foundation is the apotheosis of the inevitable consequences of care in the community. Not satisfied with creating the monster that is Phoenix Life, Mr Cowdery is using a tax exempt vehicle to finance a group of people to suggest that I need to pay more tax and NI to help other people. Delicious irony all wrapped up in a big lump of gong-bait.

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