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Budget 2010 - Pensions Tax Relief

Commenting on the Treasury’s proposal to implement the restriction of pensions tax relief, Barnett Waddingham partner Andrew Roberts said:

“There is a risk here that without due care and attention, the Treasury will damage the further reputation of the pensions industry. The consultation process that ended earlier this month clearly revealed those who objected to the proposals were doing so because of practical, administrative issues and worries about how the changes will be implemented. Instead of sweeping these objections under the carpet and hoping the whole process doesn’t have to be started from scratch, the Treasury needs to be taking decisive action.

“As an example, the Treasury has dismissed widespread calls for the Annual Allowance to be reduced (say from £255,000 to £60,000) as a simpler way of restricting tax relief, claiming that such a change could not be implemented fairly without making ‘significant adjustments to the pensions tax system that would add their own complexity’. But, as the tax system being rushed through is arguably the most complex aspect of the pension taxation system ever seen, to simply reject industry wide proposals for a simpler alternative with the argument that they would be more complex is wrong.

"The “scheme pays” system was widely rejected by the industry as being unnecessary and unworkable, particularly within DB schemes, but yet it again features in the proposals.  You have to wonder whether the only justification for pressing ahead with the “scheme pays” legislation is to save face on the work done in drafting it.”

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