Election 2010: Lib Dems would scrap higher rate pension tax relief

The manifesto said a Liberal Democrat government would raise tax allowances so people would not have to pay any income tax on the first £10,000 of earnings.

It said it would pay for this pledge with measures such as giving tax relief on pensions only at the basic rate - so that everyone gets the same tax relief on their pension contributions.

The Liberal Democrats calculated this measure would raise £5.46bn a year in 2011-12 prices.

In this year's Budget, Chancellor Alistair Darling confirmed the Government would limit higher rate tax relief on pension contributions for those earning more than £130,000.

The Liberal Democrats today said they would also give people greater flexibility by allowing them to access part of their personal pension fund early - to help, for example, in times of financial hardship.

It said it would also scrap the rule which compels you to buy an annuity when you reach age 75.

And it pledged to scrap compulsory retirement ages in a bid to allow those who wish to continue in work to do so.

It also said it would aim, over the long term, to bring in a Citizen's Pension that will be paid to all UK citizens who are long-term residents, set at the level of the Pension Credit. However it noted this could only be done when resources allowed.

The Liberal Democrats said it would also boost the state pension by immediately restoring the link with earnings growth - a move it calculated would cost £320m in 2012-13, £325m in 2013-14 and £330m in 2014-15.

It said it would uprate the state pension annually by whichever is the higher of growth in earnings, growth in prices or 2.5%.

In addition, it promised to reform public sector pensions to ensure that they are sustainable and affordable for the long term - with an independent review to agree a settlement that is "fair for all taxpayers as well as for public servants".

The party also said it would meet the government's obligations towards Equitable Life policyholders who have suffered loss and set up a "swift, simple, transparent and fair payment scheme" for those who had lost out.

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• Topics
• Investment
• Liberal Democrats
• UK Election 2010