Life and pensions group Royal London today claimed that the March Budget will be tantamount to “robbery” if George Osborne replaces current pensions tax relief with either a pension ISA or a low flat-rate tax relief for all.
The Chancellor has floated the idea of a pension ISA, whereby upfront tax relief would be abolished and workers would pay tax when they are paid, rather than when they receive their pension.
Under a flat-rate pensions tax relief, everyone would get the same top-up to their pension regardless of their income, seen as hitting higher 40 per cent taxpayers.
Steve Webb, policy director at Royal London, which employs 1,000 people across Edinburgh and Glasgow, says in today’s report: “The March Budget could be the biggest example of daylight robbery since the days of Dick Turpin.
“A pension ISA steals billions of pounds in tax revenues from the next generation who will need the money to fund the public services of an ageing society. And if the Chancellor opts for a low flat-rate of tax relief, he will be stealing billions of pounds today from the support we give to hard-pressed savers.”
Royal London is the biggest mutual life, pensions and investment company in the UK, with 9.1 million policies.
In the report, Pensions Tax Relief: Radical Reform or Daylight Robbery?, Webb says savers need “simplification and stability” rather than “tinkering”, and calls for “a generous flat rate of upfront [tax] relief combined with the abolition of the lifetime limit on pension saving”.