Darling’s tax relief proposals ‘clumsy’
Dismissing pensions industry concerns ‘diminishes the consultation process, that is according to Mercer, which has expressed ‘extreme disappointment’ that the government has failed to listen to the pensions industry in implementing its policy restricting higher rate tax relief on pensions.
Beyond the cost burden, these changes will impose on schemes, there are public policy considerations regarding the consequences if very high earners turn their backs on employer sponsored pension saving, resulting in the closure of high quality schemes for all employees.
“The government is treating pension schemes like a deep pocket it can dip its hand into when it’s short of cash,” said Eleanor Dowling, a Principal in Mercer’s retirement, risk and finance business. “It completely disregards trustee responsibility towards ordinary scheme members, forcing them to act as the agents for an elite group at the expense of the majority of members.”
Industry groups have demonstrated to the government that its regulatory impact assessment underestimates the cost of this new obligation by at least a factor of 10. Sector commentators are widely interested to see whether the Department for Work and Pensions and the Pension Protection Fund (PPF) are in agreement with a radical change such as this, which allows pension scheme assets to be paid to the Treasury to meet a new income tax obligation.
The pensions industry worked closely with government to formulate and implement the Finance Act 2004 pensions tax regime. This meant radical change for the industry, employers, trustees and members. These stakeholders were promised a simplified, stable regime in exchange for the upheaval caused by the introduction of the new system in 2006. “That regime is entirely disrupted by the insertion of these new rules, and blatantly ignores expert industry views,” concluded Dowling.
25 March 2010
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