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Stakeholder tax breaks

UK social security Alistair Darling has drafted proposals to create a single tax regime for all defined contribution (DC) pensions arrangements under which savings of up to £3,600, regardless of income, will be eligible for tax breaks.
And notably, pensions contributions will also enjoy tax incentives for five years after earnings have ceased.
The move is designed to encourage savers such as mature students and carers, previously excluded from personal pensions, to be able to take out a stakeholder pension and benefit from tax relief.
However, the government has stopped short at allowing simultaneous membership of stakeholder plans and occupational defined benefit (DB) schemes (concurrency).
The government argues this would not be good use of Exchequer resources: “It would, in many case, be used by those who already have good pension provision rather than the lower and middle earners who are the target of the stakeholder initiative.”
“Allowing such people to have stakeholder pensions could lead to providers ‘cherry picking’ by selling to the better off rather than to people without existing provision.”
Nonetheless, the government has said it is prepared to examine ideas on ‘partial concurrency’ if they are “cost effective and workable”.
In a reaction to Alistair Darling’s proposals, Alan Pickering, NAPF chairman, comments: “Concurrency is essential if the government pension reforms are to increase the amount of funded pension provision made in the UK. We therefore welcome the government’s acknowledgement that there is merit in concurrency for members of defined benefit schemes.”
The government’s finance bill will be published early this month.

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