According to yesterday’s Sunday Telegraph Chancellor George Osborne is in talks which could result in higher rate tax relief on pensions being scrapped.
The article says that limiting the tax relief paid out to 40% and 50% tax payers could save the treasury £7 billion each year. Any such saving would have an almost immediate impact and could potentially be used to increase the level of the basic state pension.
The apparent talks come on the back of last year’s move to limit the amount which could be paid into a Personal Pension to £50,000. Previously the maximum which could have been paid into a Personal Pension was £255,000.
The report went on to say that a move to limit tax relief for higher rate tax payers could be part of a wider plan to abolish tax relief for all pension savers. Such a move would save the Treasury about £22 billion a year.
The pensions industry would greet with dismay and move to limit or abolish tax relief for pension savings and experts are already pointing out that the tax relief on pension contributions is in effect the “reward” given to pension savers for making their own provision.
When asked about the report a Treasury spokesperson said, “All our plans in this area were announced in the budget and we have no others.”