In its response to the government’s tax relief proposals, the Association of Member-Directed Pension Schemes (AMPS) has voiced a number concerns.

Overall, AMPS, which represents most Sipp providers, says that it is worried about the approach of recent governments in failing to support the principles of pension simplification and eroding tax allowances used to underpin simplification.

A spokesman said: “We are concerned by the approach of successive governments in undermining the principle of pensions simplification as enacted in 2004, and in eroding those allowances upon which the simplification concept was based.”

AMPS says that despite what some critics have said, it does not regard the current system of pensions tax relief as inherently complex and does not regard the basis on which that tax relief is applied as serving as a “barrier to engagement with pensions saving, or to effective planning for how to use pension funds in retirement.”

On the lifetime allowance, AMPS says it is “not persuaded” that the lifetime allowance, when considered in the context of falling values of pension tax allowances generally, is a sustainable concept.

AMPS fears that the lifetime allowance risks being viewed as a “barrier to ambition.”

{desktop}{/desktop}{mobile}{/mobile}

It wants the lifetime allowance to be maintained in legislation and says that the declining tendency of annuity rates offers justification for an increased lifetime allowance, in particular to address the potential for disparity in the underlying worth of the lifetime allowance between defined benefit schemes and defined contribution schemes.

In other submisisons to the consultation, AMPS says that it believes that a move from the settled system of Exempt-Exempt-Taxed to Taxed-Exempt-Exempt could bring significant anomalies to the calculation of tax charges on the respective employer costs, under defined benefit schemes and defined contribution schemes, of members’ accruing benefits.

It fears that an attempt to “balance that disparity through different bases of tax charge and annual allowance would bring unwelcome complication to the pensions system.”

The body also acknowledges that a flat-rate system of tax relief might encourage basic rate taxpayers to save more into pensions but it wants thorough research before such a system were prepared for implementation, to consider the potential effect on pension savings among higher rate taxpayers.

It warns that unless an alternative system can be found which demonstrably enhances the incentive to save across all income tax bands, and subject to further consultation on that prospect, it would advocate retention of the Exempt-Exempt-Taxed basis of pensions tax relief, with the continuing principle that, within the tax-relievable limit, member contributions should be subject to tax relief at the member’s marginal rate of income tax.

In any event, AMPS recommends that the Government defers considering fundamental changes to the system of pensions tax relief until the implications of recent legislative change, in particular the Taxation of Pensions Act 2014, have been properly considered.