UK – The Society of Pension Consultants has called for a revision of tax rules to encourage companies to repair pension fund deficits.

It said: “Employers would be more willing to repair deficits in pension funds, if the tax relief on large 'catch up' payments was made available more quickly.”

It is convinced that relaxing the rules on tax relief on such large contributions would leave the occupational pensions sector in a “far healthier state”. And it called on the Inland Revenue’s Pension Industry Working Group, which was set up to prepare for the new pension taxation regime beginning in April 2006, to take this into account.

"We believe this would be the right time to urgently re-examine policy in this area," says SPC secretary John Mortimer in a letter to HM Revenue & Customs.

He said the requirement to spread the tax relief could sometimes be a “significant disincentive” to making the deficit reduction contribution at all.

He added: “It was is surprising that the tax relief spreading rules make no exception for large contributions paid with a view to reducing these deficits. As far as we can see these contributions will be treated in exactly the same way for spreading purposes as any other large contributions."

The Inland Revenue said it was a policy issue, and thus under the remit of the Treasury.

Meanwhile, the Confederation of British Industry has said the Pension Protection Fund levies could hasten the end of company final salary schemes, according to the Financial Times.

It quoted CBI deputy director-general John Cridland as saying that said yesterday that increasing the cost on business for the Pension Protection Fund could have a perverse effect, hastening the demise of the final salary scheme.