Shadow pensions minister Gregg McClymont has signalled Labour will propose reforms of pensions tax relief before the next general election.
Speaking at the Labour party conference in Brighton today, McClymont said the debate on the future of pensions tax relief will continue and to “watch this space” for Labour’s proposals.
Earlier this year, the Pensions Policy Institute published a paper with options for reform including the possibility of a flat rate 30 per cent tax relief instead of being levied on income tax bands. The Treasury and Association of British Insurers have also called for a debate on tax relief and whether reform is required.
Labour is already proposing a cut to top rate pensions tax relief, from 45 per cent to 20 per cent for those earning over £150,000, but responding to a question from Money Marketing, McClymont hinted he could go further.
McClymont said: “There is quite a lot of movement on tax relief in terms of the public debate. In terms of Labour’s position before the next election it is case of watch this space.
”With the ABI’s recent tonal shift on tax relief and the Pensions Policy Institute paper I think there is a greater focus on the decile distribution of tax relief and looking at skewed it is to the top two deciles. Perhaps it isn’t the best way to spend tens of billions of pounds every year in public subsidy for savings. I think that debate is going to continue but I can’t say more at this stage.”
Speaking alongside McClymont, ABI director general Otto Thoreson said: “We will wait for what comes from Gregg and the team but the ABI’s position is that we are ready for a debate on this. It is about principles and making sure what is agreed then it is something people understand, how it works and how it benefits them.
“There is a question of whether it is perceived to be fair because as more people come into the system it will be a larger outgoing for the country. The main thing is to have confidence in the system and not keep moving the goalposts if you are asking to save for many years. Until we get something settled on tax relief it is going to be an enormous distraction.”