Taxation of high earners pension contributions is the final nail in the coffin of defined benefit provision, according to Hargreaves Lansdown.
It says the small print in Wednesday's Budget shows the change to the tax treatment of pension contributions for those earning more than £150,000 a year will generate £3.1bn in the 2012/2013 tax year.
The firm adds the figure was so high because the Government intends to tax people for the benefits they enjoy from their employer's contributions to a company pension.
Hargreaves Lansdown head of pensions research Tom McPhail explains the employer would still enjoy corporation tax relief, but the individual will be taxed on the benefit.
He says this represents a "catastrophic additional tax charge" for high earners such as company directors.
McPhail has calculated the average cost per individual is £10,650, based on HM Revenue & Customs data showing the number of taxpayers earning more than £150,000 (291,000) and the £3.1bn anticipated gain to the exchequer.
"Any employer running a final salary scheme is likely to give up at this point," he says. "Your senior execs have gone from enjoying a tax break on their own contributions, to a situation where they not only lose their own tax relief, they also have to pay tax on their employer's contributions.
"Given that it is going to cost them an average of £10,600 a year, it is a fair bet that many of them will just shut their final salary scheme down and walk away."
Hargreaves Lansdown argues the only logical strategy for pension investors generally, and for higher rate tax payers in particular, is to make the most of the tax breaks on pensions while they are still available.
"For as long as higher rate relief is available to you, irrespective of whether you think you will ever earn over £150,000, the message is very clear - get as much money into your pension as you can and make the most of the tax breaks while they are still around," McPhail says.
Sacker & Partners associate Eleanor Daplyn adds: "The Government has said it will be consulting on how the changes will apply to pension savings made by employers on behalf of their employees, but this feels a bit like shuffling deckchairs on the Titanic.
"Legally, the proposals can only lead to further complication and expense for trustees and employers alike at a time when the pensions industry faces more than enough challenges already."
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