In the run-up to next month’s Budget, concern is growing in the industry that the Government may slash higher-rate tax relief to raise funds. The Government is investigating ways to fund an increase to the Isa limit and it is understood that pension tax relief changes are on the table.
It is estimated that the Treasury could save around £2.3bn from scrapping the relief.
The LibDems support axing higher-rate relief while the work and pension committee called for a review of relief bands in 2006.
Legal & General wealth policy director Adrian Bould- ing says: “People who earn more than £40,000 will stop making pension contributions and will look to other forms of saving.
“Most seriously, when company directors lose interest in pensions for themselves, they also lose interest in pensions for their staff. We could see an enormous levelling down across the corporate pension scene.”
Kohn Cougar managing director Roddy Kohn says: “I think that this smacks of petty politics. A good deal of higher-rate taxpayers are already sceptical of saving into pensions, largely because of the Government’s meddling. This would just throw a whole raft of bad PR out there on to the subject of pensions again.”
A Treasury spokesman says: “We keep all taxes under review.”