Hymans Robertson warns of 'demise' of pension system
UK - Taxing pension savers below the annual allowance could "accelerate" the demise of pensions, Hymans Robertson warned today.
Yesterday's publication of a discussion paper by HM Treasury in the UK has mostly been warmly received, but several companies have expressed concern about details of the proposals.
Chris Noon, a partner at Hymans Robertson, said the company was broadly supportive of the proposals, but said that limiting the tax relief on pensions below the annual allowance to 40% was "a step too far".
"If you begin taxing below the annual allowance this could have a negative impact on people's views of pensions which [could] ultimately help accelerate their demise," he said.
However, Noon supported the changes proposed for the annual allowance, which will likely be lowered from £225,000 to aroundof £30,000 to £45,000, while lifetime allowances would be lowered by £300,000 to £1.5m.
"We believe the suggested revised annual allowance of £40,000, in combination with allowing a revaluation of previous year's benefits, will actually work to take a lot of long serving, lower paid employees out of the regime," he said.
Eleanor Dowling, a principal at Mercer's regulatory group added that any changes needed to be considered carefully so as not to extend tax relief to those on middle incomes inadvertently.
Dowling said further that rushing through any changes simply to raise money was unwise: "The government needs to think beyond revenue-raising to the impact the changes will have on ordinary pension savers."
Andrew Cawley, head of pensions at KPMG, thinks that the current proposals are favourable to the previous, Labour government's ideas, as they would have a smaller effect on a larger number of people than the existing tax regime.
"They will, nonetheless, diminish the general level of pension savings and at the same time create further administrative burdens for employers and trustees," he told IPE yesterday, warning that the tight timescale involved would place very great demand son those involved.
Julie Patterson, a director at the Investment Management Association (IMA) welcomed a simplification of pension tax relief, but said that a "more fundamental rethink" to strike the right balance may be needed in the future.