Decumulation and pensions tax relief would be the top priorities for an independent retirement savings commission that is being called for in the next parliament, two trade body leaders have said.
This morning FTAdviser reported that a trio of trade bodies have renewed calls for an independent retirement savings commission, revealing in a new report that a vast majority of survey respondents agree that an impartial committee is needed.
In the report, the National Association of Pension funds, the Association of British Insurers and the Trade Union Congress come together to make the case for a standing independent retirement savings commission.
Speaking at an event held in London on the case for an independent retirement savings commission today (30 April) Nigel Stanley, head of campaigns at the Trade Union Congress said that decumulation and pensions tax relief “work together in a way”.
He said: “I think that freedom and choice has now become a tax planning mechanism for better off people as much as it is a pensions decumulation system.”
Joanne Segars, Napf chief executive, said: “We’ve seen all these different proposals on tax but as I said there’s some really interesting and important debates we need to be having within that discussion - what we do about tax so a knee jerk response to that isn’t right.”
However, Mike Cherry, policy director at the Federation of Small Businesses believes that further steps are needed to bring the commission together before topics of focus are decided upon.
He said: “People just don’t understand what people are doing to save for their retirement so I think they’ve got to bring the evidence together before we can decide where we need to get them to and then work back from that.”
The leaders said that they expected the commission would be funded through taxation. Ms Segars added that one glaring hole in the party manifestos is any long-term plan or vision for pensions is all manifestos.
So far, industry experts have warned that pensions tax relief is being used as an ‘election piggy bank’ to fund other initiatives and election promises. Ms Segars agreed that pensions were being used a short term way to fund the elections.
Labour has proposed capping pension tax relief for higher earners, cutting the annual allowance and limiting the lifetime allowance to pay for some of its spending pledges, while the Tories have already pledged to cut the annual allowance and limit relief for top earners.
Under the Tories plans, the annual allowance would be reduced from £40,000 to £10,000 for very high earners.
Claire Trott, head of technical support at Talbot and Muir, said that advisers have “raised concerns” that whoever gets into power or whatever combination could see “all the good publicity around pensions ruined”.
She said: “All the major parties have made some comment or suggestion that they will restrict tax relief for high earners one way or another and this could see people put off contributing because of the complexities surrounding the calculations to tell if they are affected.”
“We saw this in 2009 when Labour proposed to cut tax relief for those earning over £150,000 (later reduced to £130,000).
“It was not as simple as what were your earnings, there was a multiple stage process to work out the level of net relevant earnings over and average of three years and then a check on what contributions would count towards the special annual allowance, which excluded contributions deemed to be ‘regular’.
“Anything over the special annual allowance incurred a special annual allowance charge of 20 per cent, meaning only 20 per cent tax relief was received into the scheme. Labour’s proposals are similar to the 2009 proposals which I don’t feel any adviser is going to welcome with open arms.”
ruth.gillbe@ft.com
