Reports that tax relief on pension contributions is going to be phased out in the chancellor's upcom...
Reports that tax relief on pension contributions is going to be phased out in the chancellor's upcoming pre-Budget statement next month have been caned by industry players and government alike as an example of pre-Budget hype without substance.
Bestinvest managing director Jason Hollands says that following through on a policy of abandoning tax relief would be "disastrous" for the government's stated aim of encouraging savings.
"Who bought unit trusts and OEICS before PEPs and ISAs? Ending tax relief would only be another way of bashing the middle classes. Given that this is at the proposal stage, we need to make sure this stealth tax does not get through."
The Treasury says it will not comment on what it considers speculation about what may or may not appear in the pensions Green Paper, due before the end of the year.
A spokesman says the issue of tax relief was likely discussed, but only as one of any number of options currently on the table, and nothing will be decided until the Green Paper is published.
Scottish Mutual pensions and investments development director Leslie Gray says that the whole argument over whether to replace relief with matching contributions misses the point of pensions.
"The fundamental point of pensions is that money is transferred before tax to a tax-free fund, and that tax is applied once the funds are drawn as income."
"That fundamental is difficult to change. For example, with ISA accounts taxed income is put into a tax-free environment, and the funds can be withdrawn tax free.
"You cannot implement such radical change to pensions without also having to change things like ISAs, and I just can't see that happening.
"One thing that could happen is that base rate payers are given more than the basic rate of relief to help save, with the quid pro quo that they wouldn't be allowed to take the quarter in cash in order to maintain the level of income. That would be relatively easy to do," he says.
The Green Paper is due for publication sometime in the "autumn" according to the government, but with about one month to go until the pre-budget statement, the opportunity presents itself for chancellor Gordon Brown to hit two birds with one speech.
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