Elaine Turtle: It's pension tax relief Groundhog Day

You could be forgiven for thinking that it was Groundhog Day again. Opening the Sunday newspapers and then looking at the pension trade titles last week, we see that the Treasury are once again investigating the option of introducing a flat rate of pension tax relief. The aim is to divert the tax relief saved towards the national health service (NHS). It would appear that the proposals are at an early stage, but I would be surprised if the £4bn saving that is being banded around is accurate. While this is of course admirable, I just don’t understand why there is constant attack on the pensions system. It is hard enough to encourage a person to save for the long term, without this constant tinkering, which ultimately means there is distrust of the sector. You can’t blame people for not saving for the long term, they are told on the one hand that they can have access to their pensions, then if they are in a DB scheme they are told they have to take advice before transferring, quite rightly, but and that is if they can find an authorised adviser to provide the advice.What we need to do is create a system that we can all be proud of, ensuring that there is stability within the system and that we educate everyone on the benefits. The proposals being discussed suggest a flat rate of 25p, this would mean that the wealthier higher rate tax payers would lose out but it might encourage those that pay basic rate tax. One concern that I have is that if these wealthier higher rate tax payers decide to save outside of the pensions environment then we could see innovation dry up and an increase in fees. Pensions need to be de-politicised and seen as policy for the long term with a system that is fit for all.But, if we are going to meddle with pensions then changes to pensions tax relief may be the preferred option. I have to admit to personally preferring a flat rate of 33%, so that, for every £3 an individual saves into a pension, they would receive an additional £1. This would be very easy to understand and meaningful for those outside of the pension system. Though it means a drop for wealthier individuals it is still an incentive but more importantly for those who we need to encourage this might make them do so.It will be interesting to see how these proposals progress and develop and if the political parties are in favour. The original proposals were from George Osborne but were shelved and it may be that as this won’t necessarily be a vote winning policy change that it ends up back on the shelf gathering dust, waiting for the next Groundhog Day. Elaine Turtle, director, DP Pensions

Elaine Turtle: It's pension tax relief Groundhog Day

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