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Pension proposals 'need to be rethought'

By Tom Farley, Thu 4 Mar 2010 - Published in Pensions

The government needs to review its proposal to change the taxes applied to pensions of high earners, an industry group has claimed.

Under the plans, the higher rate tax relief will be restricted for people earning more than £130,000 a year from April 2011, in the hope of saving around £12,000 per annum from each of the top 1.5 per cent of the UK's earners.

According to the National Association of Pension Funds (NAPF), the plans could affect the retirement savings of those earning below the threshold of £130,000 and will bring high implementation costs for employers and pension schemes.

The organisation has proposed an alternative system which reduces the annual allowance for tax-favoured pension contributions to a range of between £45,000 and £60,000, from its current £245,000 limit.

Nigel Peaple, director of policy at the NAPF, commented: "The government should stop its plans to introduce an entirely new approach to pensions taxation for high earners, look carefully at our evidence of the threat posed to other pension savers, and listen to our proposals for an alternative approach."

This week, Charlie Kirby, deputy editor for Pensions Week, claimed that raising the state pension age to 70 could save a total of £150 billion by 2050.