The Inland Revenue taxation simplification for pensions will be "radical", the Chancellor Gordon Bro...
The Inland Revenue taxation simplification for pensions will be "radical", the Chancellor Gordon Brown confirmed today in his pre-budget statment.
"In the light of the findings of the Inland Revenue review, the Government now intends to consult the pensions industry and other interested parties on radical proposals to simplify the taxation of pensions," he said.
Details of the Government's proposals will be published alongside the pensions Green Paper on December 17.
According to Scottish Equitable's pensions development director, Stewart Richie, this is the first time that the Treasury has announced changes will be radical. According to Richie, radical would be the creation of a single tax regime. "That would be radical provided it had a retrospective effect," he said.
There are currently eight different tax regimes for pensions and within these regimes there are different rules concerning the levels of contributions and the levels of benefits.
"This proliferation of regimes and rules creates complexity that makes pensions difficult to understand and explain, constrains people's choices about when and how to save, and imposes unnecessary administrative burdens on employers, individuals and pension providers," says Brown.
In March 2001, the Government launched a review of the tax regimes governing occupational pensions, led by the Inland Revenue in partnership with the pensions industry, and drawing on a wide range of evidence, including that presented in the Sandler review of retail savings. The review studied the various tax regimes and their impact on employers, pension providers and individuals who save in pensions.
In addition, Richie says that although Gordon Brown did not give too much away in today's pre-budget statement, he is relieved the Treasury will not make any changes to the tax relief for pension contributions, an area which has needed some clarification.
Brown did not give too much away on the Government's response to the Annuity Consultation, which ended in May, though he did give some indication that a response will also be released on December 17.
"Annuities provide a financially efficient and secure means of turning pension capital saved through defined contribution pension arrangements into income that lasts for the whole of an individual's retirement," says Brown.
"The Government wants to deliver increased product choice and flexibility for consumers in the annuities market. Further proposals to make the annuity market function more efficiently will be included in the forthcoming consultation on simplifying pensions tax."
"It's whetting our appetite for December 17," says Richie.
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