Following a lengthy study, the National Association of Pension Funds (NAPF) has launched a proposal to simplify the tax regime for pensions, thus removing a major barrier to the achievement of the Government's objective of increasing pension provision.

In its conclusion, the NAPF found no practical alternative to relieving contributions and investment in-come from tax, and levying tax when the pension comes into payment. It also confirmed that successful funded pensions systems around the world are based on this approach and that breaches of this regime in the UK are already damaging future pension provision.

In particular, the proposal would underpin a successful launch of the Stakeholder Pension, as well as re-placing the current jumble of pension rules with a single regime without limits on contributions or benefits.

Advantages of this include a single tax regime for all forms of pension, the freedom for individuals to contribute to a pension when they are not in work, ie from savings, investments or inheritance

Detailed rules to be swept away by the proposal include the obsolete maximum limits on funding of pension schemes, releasing employers and trustees from monitoring burdens and costs. Upper limits on contributions will also go, and the earnings cap, which has locked executives and high paid skilled staff into their jobs and led to the growth of unapproved schemes, will also disappear. Hugh Wheelan

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