Influential think tank the Institute for Fiscal Studies has added to pressure on the government from the pensions industry not to restrict tax breaks ahead of the Budget later this month.
The IFS says it would be a “step in the wrong direction” to resitrct pension tax breaks on high earners, even though it could save £11bn for the exchequer, The Times reports.
Philip Hammond has noted that the bill for pension tax relief is “eye-wateringly expensive”, hinting that tweaks to allowance may be on the cards, since the government has also said there is “no clear consensus” for a more radical reform of the savings system.
Instead of a measure that would be “unfair and inappropriately distort behaviour”, the IFS suggests that council tax rates on the four top bands of property could be doubled, hitting those with the most valuable homes.
It also suggests that older people could pay more tax, which would be fair since they are the heaviest users of the NHS, through removing the exemption from national insurance contributions for those above state pension age.
The IFS is ccalling for an end to exemptions of pension funds from inheritance and income tax when bequethed, however, arguing that this “created an absurd position where the tax system incentives people to use everything except their pension to pay for retirement”.