Osborne told to keep hands off pension tax

by Richard Crump

More from this author

03 Dec 2012

  • Comments
segars-joanne-2010

THE GOVERNMENT has been warned not to make further cuts to the annual tax allowance because it would discourage people from saving into their pension pot.

The National Association of Pension Funds (NAPF) told chancellor George Osborne that changes to the pensions tax system would undermine public confidence in saving for retirement and could deter people from being auto-enrolled into a pension.

There is growing speculation that the chancellor is considering cutting the maximum amount of annual pension contribution that is exempt from tax, known as annual allowance.

Currently, the maximum tax-free amount that people can pay into a pension annually is £50,000 but the NAPF believes this could cut to £40,000 or even £30,000 a year. The government reduced the annual allowance from £255,000 to £50,000 with effect from 6 April 2011.

In its submission ahead of the Autumn Statement, in which Osborne will outline plans for the economy, the NAPF said the government should leave pension tax alone.

"If the chancellor goes ahead, it's not just the rich who will be affected, but also middle earners. Moderate earners paying into a final salary pension who have built up many years of service could be hit with significant, one-off tax bills as a result of modest promotions," Joanne Segars [pictured], NAPF chief executive, said in a statement.

The NAPF also called on the chancellor to help pension funds deal with the damaging effects of quantitative easing, which it said has contributed to pension fund deficits hitting record levels, and called for an adjustment to discount rates based on gilt yields, or an alternative discount rate approach.

Quantitative easing has forced gilt prices up, reducing the yields that investors like pension funds make on them. The NAPF estimated earlier in the year that quantitative easing had increased deficits by at least £90bn over the last three years.

"The chancellor needs to acknowledge the damaging effects of QE for pension funds and the employers offering them. He must give pensions some respite by indicating that an adjustment to discount rates based on gilt yields is helpful. This could free up more cash for businesses to spend on investment and jobs, helping the wider economy," Segars said.

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.