The DWP and Treasury are considering proposals to further restrict pension tax relief to fund the proposed Universal State Pension, a leading academic says.
Speaking at the Henry Stewart conference on self-invested pensions last week, Centre for Policy Studies research fellow Michael Johnson said he had tabled the idea for a "progressive removal" of tax relief beginning with the removal of higher rate tax relief.
He said such a move would save about £7bn a year but would act as a disincentive for higher earners to contribute to pensions so would be tempered by also limiting income tax in retirement to 20% - resulting in a saving of some £5.6bn per year.
According to Johnson the next step would be to move towards a more ISA-like framework and do away with all upfront tax relief - generating huge savings each year.
Johnson said: "This could be used to increase the state pension to £140 per week. This would make the most common sense and would lift almost all pensioners out of poverty.
"Then part of the £8.6bn we allocate to means tested benefits could be used to further boost the state Pension. This would simplify the system and I know the Treasury is looking at this."
A Department for Work and Pensions spokeswoman would not confirm if they were considering Johnson's approach but said it was working with the Treasury on pension reform.
A statement said: "The aim is a simple, decent state pension for future pensioners, which is easy to understand, efficient to deliver, affordable and provides a firm platform for workplace saving."
Hargreaves Lansdown head of pension research Tom McPhail is dubious about whether such reform would happen.
He says: "While we still need reform of the state pension, I think the government will do this without having to revisit pension tax relief which would be a retrograde step."
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