IFS hits out at pension tax relief plans

Plans to claw back income tax relief on pension contributions have been
attacked by the Institute of Fiscal Studies, claiming the changes will create
“complexity, unfairness and inefficiencies”.

In its response to the Treasury consultation on how the changes can be best
implemented, the IFS hit out at the government for not consulting on the policy
itself, enabling the industry and tax experts to point out the flaws in the
legislation, reported

The new rules will see relief for those whose income, including the value of
employer pension contributions, exceeds £180,000 a year reduced from 50% to 20%
from April 2011.

“The government’s goal is to raise money by reducing the subsidy that the
wealthy enjoy on their pension contributions,” said Carl Emmerson, IFS deputy
director. “But many people on high incomes will still be able to receive
unrestricted income tax relief on their pension contributions – for example by
making greater use of salary sacrifice arrangements. A better approach would be
to reduce the amount that individuals can take tax-free from a private pension
from its current level of £437,500.”

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