8th July 2015
Tax relief on pensions could be abolished as pensions move closer to the ISA structure. In a consultation announced today, the Chancellor says tax relief may not be available on pension savings but tax would not be paid when a pension is in payment.
The government might offer a top up to pension saving in some other form.
The move would bring the Treasury several billion pounds a year but it already the subject of fierce criticism from the pension industry who say it could put millions of saving. Technically, it involves moving from an exempt, exempt, taxed (EET) structure to a taxed, exempt, exempt structure, which would enable to bring forward savings of several billion pounds a year.
The Chancellor said: “Pensions could be taxed like Isas. You pay in from taxed income – and its tax free when you take it out – in-between it receives a top-up from the government. This idea, and others like it, need careful and public consideration before we take any steps.”
John Fox, managing director of Liberty Sipp, says: “There’s no place for the faint-hearted in the pensions industry these days.”The Green Paper will scare the life out of many traditional pension providers, but innovation, change and empowering people to save in the way that suits them best, are key to defusing the pensions time bomb.
“Making pensions more like ISAs is another potentially radical step and has come while the industry is still coming to terms with the new pension freedoms.”
“To say the Government has shaken up the pensions industry would be a massive understatement. For the first time, we may actually be seeing some joined-up thinking on pensions — a regime that encourages people to save irrespective of generation.”