Pension taxes “flawed” says AC
In a detailed response to the HM Treasury and HM Revenue & Customs consultation paper Implementing the restriction of pensions tax relief, the Association of Consulting Actuaries (ACA) has said that the policy is “seriously flawed” with each attempt to try to make it fairer only increasing the complexity and adverse impact on pension schemes. Whilst identifying ways in which some of the worst anomalies could be avoided in the response, the ACA has called for an evidence-based impact assessment of the real costs of the reforms, properly identifying how this hits the private sector, and the remaining defined benefit schemes in particular – few believe the consultation paper’s figures are at all realistic.
Commenting on the response, ACA Chairman, Keith Barton said: “We understand the desire to raise additional revenues in the current climate and that those on higher incomes must accept they will bear a higher proportion of the tax take. However, the policy proposed, centred round an income threshold, is just about the most complex and inefficient way possible, it seems to have been dreamt up with scant regard to how arbitrary it will be as comparing one individual to another. Worse still, it seems almost to have been designed to do maximum damage to ongoing pension provision, in direct opposition to the Government’s stated policy of encouraging the retention of ‘quality’ schemes.
“The policy is intended to raise revenues from around 300,000 high earners, but in reality it will directly affect many more people, and will have the effect of reducing pension prospects for hundreds of thousands of employees on low and middle incomes as the closure of good schemes accelerates, as a consequence of the measures.”
“Simply put, the policy – to use the politest descriptions, is dreadfully conceived, but stubbornly pursued, despite pretty well unanimous warnings from across the business and pensions world echoing our conclusions. Hasn’t enough damage been done to quality pensions? We can only hope an incoming Government after the General Election of whatever political colour – will be sensible enough to look again at a simpler way of achieving the same end objective.”
Also commenting on the detail of the response, Karen Goldschmidt, Chairman of the ACA Pensions Taxation Committee said: “We have been told that the Government will not change course, which is desperately concerning given the anomalies and substantial administration that will flow from implementation.” Our detailed response identifies and seeks to resolve the anomalies that we can, but, whatever we propose, implementation will be seriously flawed unless the policy is totally re-thought. Copies of the full ACA response are available from the ACA (call 020 3207 9380) or can be viewed at the ACA website at http://www.aca.org.uk/ see ‘Recent Publications’
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