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Forum Brief: Pensions Limit
The Treasury is to impose a £1.4 million lifetime limit on pension savings, even though a government watchdog has concluded that twice as many people will be affected as was originally thought.
Forum Response: Help the Aged
Mervyn Kohler, head of public affairs at Help the Aged, told ePolitix.com: "The cap has become the issue, but the real issue is the radical simplification of the taxation of pension schemes. This sweeps away rigid rules which currently seriously restrict the flexibility of pension schemes: in particular it allows people to hold different schemes concurrently (not a bad idea when it looks dangerous to have all your eggs in one pension basket), and allows people to combine earning an income with drawing a pension income.
"This is a much needed reform. To be workable, it needs a common framework to compare pension schemes in terms of the tax relief to which they are entitled. The cap of £1.4m over a lifetime is thus suggested, and now the NAO seems to confirm that this is roughly appropriate. Whether it should be £1m, £1.4m or £1.7m is a matter of profound unconcern to the vast majority of savers, but the principle of the simplification could represent a valuable and necessary reform.
"The debate should focus on the package as a whole, not on the wrapper."
Forum Response: Institute of Directors
Derek Brownlee, pensions executive at the Institute of Directors, told ePolitix.com: "Although the NAO concludes that the limits will not affect a significant number of people initially, over time more and more people will be affected as earnings growth exceeds inflation. There is a danger that the limit deters people from saving in their pension, even if they are unlikely to be affected by it. Rather than focusing on restricting pension saving for those with reasonable provision, the focus ought to be on encouraging extra saving from those on lower incomes."
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