Tax  

ABI revives call for flat rate pension tax relief

“The vast majority of tax relief is given to DB schemes so any changes need to cover both DB and DC. Making changes in the DC market only is simply playing around the edges.”

He added: “There is a huge amount of complexity in the tax system, with all of the various allowances, so any changes need to simplify matters to help people better understand the benefits of saving using pensions as the vehicle.”

The government had already debated a makeover of the pension tax relief system in 2015, when the idea of a flat rate was floated.

But in 2016 then-chancellor George Osborne dropped plans to either scrap upfront relief in favour of a ‘Pension Isa’ with tax-free withdrawals from aged 55, or introduce a flat rate, which would have benefited lower earners and hit the wealthier core of Tory voters.

Lesley Carline, president of the Pensions Management Institute, said there were other issues in the pension system that could be addressed to solve inequalities, such as the net pay anomaly.

Ms Carline said: “Amending the rate of tax relief is all very well, but the rate itself is just one inequality and fairness requires us to address them all. 

“Firstly, there is the relevance of tax relief to members of DB schemes since there is no direct correlation between contribution rates and benefit accrual. 

“Secondly, and probably the most pressing at the moment, is the anomaly between the net pay arrangement and relief-at-source for DC members who are low earners.”

amy.austin@ft.com

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