Pensions tax relief response
Published on 01 October 2015 11:00 AM
In response to the Government's consultation ‘Strengthening the incentive to save: a consultation on pensions tax relief', Caroline Abrahams, Charity Director for Age UK, said:
'We are strongly opposed to the idea of ‘ISA style' pensions because the chances are many future pensioners would lose a lot of money compared to the current arrangements.
'At first glance ISA style pensions sound attractive because they mean savers wouldn't pay tax on withdrawals past the age of 55 but would do so earlier on instead, when they are earning and making contributions. However as most older people don't pay tax once they reach retirement, this would be a new tax demand while they are still in work, which could put family finances under strain and result in less pension saving.
'In addition, no government can bind its successors so there's a risk a future administration would decide to impose tax on withdrawals by pensioners after all, meaning people could end up paying tax twice over.
'No doubt this proposal would be good for the Treasury - it would be bound to result in a bumper tax yield for the next few years - but it surely represents a rotten deal for pension savers.
'And if all that wasn't bad enough, pension experts also say it could undermine our pensions system more generally by reducing the incentives on employers to provide decent pensions.
'For all these reasons we think it's imperative that the Pension ISA proposal does not go ahead, and instead the Government introduces a single rate of tax relief for all savers.'
Vicky Smith, Senior Media Officer, Age UK,
t 020 3033 1438, email: firstname.lastname@example.org