The Association of Independent Financial Advisers (AIFA) has written to George Osborne ahead of the proposed changes to pensions tax relief in next week's Budget.
The letter, co-signed by the 15 members of the AIFA council, calls on the Chancellor to avoid cutting pensions tax relief for higher-rate clients.
Here is the letter in full...
We are writing to you from The Association of Independent Financial Advisers (AIFA) to raise our concern about the possibility of the government reducing tax relief on pension contributions to the basic rate of income tax. AIFA is the representative body for the IFA profession. There are approximately 16,000 adviser firms that employ 128,000 people, and turnover is estimated at £6.5 billion.
We are concerned that a reduction in tax relief for pensions will discourage individuals from investing in their pension fund, thereby reducing saving for retirement when increasing longevity means that people need greater encouragement to save. It would undermine the government's policies of encouraging personal financial responsibility and reducing the burden on the welfare state.
Furthermore, such a step would further complicate the already hard-to-navigate pension regulatory framework. Before the last election, you laid out your intention to support saving through the tax system and to avoid the uncertainty and damage caused by unpredictable and rushed changes to the tax system. We fully support these goals.
We believe it would have significant complication for public sector pension reforms. A restriction on higher rate relief would mean a large number of members of public sector schemes earning over the threshold will suddenly find themselves liable for marginal tax on their pension accrual.
Although we recognise the argument that led to last year's reduction of the annual allowance from £255,000 to £50,000, we are strongly opposed to this latest possible change. This measure will affect a vast number of people who are making sensible steps to ensure that they have adequate retirement savings. It would undermine the principle that pension saving depends on - that income is not taxed twice. We believe the effect of such a measure would be to reduce contributions to pensions, which would be a bad outcome for the future of society and the economy.
The AIFA Council
Lord Deben, AIFA Chairman
Ivan Martin, Executive Chairman Sesame Bankhall Group
Martin Greenwood, CEO Tenet
Malcolm Streatfield, CEO Lighthouse
Jim Reeve, CEO Positive Solutions
Nigel Speirs, Head of Distribution Sanlam
Wallace Dobbin, Managing Director Corporate Intrinsic
Stuart Dunbar, Managing Director Argyle Consulting Limited
Richard Carne, Managing Director Asset Management IFA Ltd
Gary Bottriell, Managing Partner Bottriell Adams
Harry Katz, Managing Director Norwest Consultants
Neil Liversidge, Managing Director West Riding PFS Ltd
Keith Blacker, Chairman Protection and Investment Limited
Martyn Laverick, Managing Director Jelf Group
Barry Kayes, Indpendent Industry Expert
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Some 2,000 consumers affected