NAPF: Pension tax reform ten times more expensive than expected

The Government’s new tax proposals for pensions is likely to cost ten times more to implement than government estimates, a peak workplace representative group said.

NAPF, which speaks for 1,200 pension schemes with some 15 million members and assets of around £800 billion, criticised the government’s planned overhaul of tax relief surrounding pension schemes.

The body said the reforms would further undermine tax saving in the UK and would be costly to implement, up to a total of £3bn, compared to government estimates of £265m-to-£305m.

“These complex proposals are likely to cost ten times more to implement than estimated by the Treasury and clearly fail to meet the Government’s own Better Regulation principles,” the body said in a statement.

HR consultants Mercer described the reforms as “a smash and grab” by the government.

Deborah Cooper, Mercer’s head of retirement resource group, said if pension schemes are no longer perceived as tax efficient for high earners, “the incentive to provide more general employer-sponsored pension savings will be reduced, and could lead to further cutbacks in what is available to employees”.

“We completely support the Government’s aim to provide a tax system that is fair, affordable and sustainable…but these proposals are contrary to all of those aims”.

Read more about the government’s plan: Implementing the restriction of pensions tax relief