UK pensions: More than half would favour a move to a flat rate pensions tax relief scheme, but the pensions industry might struggle to adapt, warns pensions company

 
Hayley Kirton
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At present, pensions tax relief is applied at the same rate as income tax for each person (Source: Getty)

More than half of pensions savers are in favour of a shift to flat rate pensions tax relief.

A survey released today by pensions company Aegon discovered that 60 per cent of customers would favour a move to a flat rate of 33 per cent for pensions tax relief, which is currently applied at the same rate people pay income tax at.

"Moving to a system where everyone receives the same tax relief top-up whatever income tax they pay would be another landmark pension change from this government," said Steven Cameron, regulatory strategy director at Aegon. "Importantly, assuming the single rate is set somewhere between 25 per cent and 33 per cent, it would mean pensions become more attractive to low and modest earners as the government would be giving a bigger boost every time a basic rate or non-taxpayer pays into their pension."

Read more: Pensions industry could benefit from tax relief reforms following new consultation

The Financial Times reported that chancellor George Osborne could reveal a flat rate of pensions tax relief in the upcoming March Budget.

Meanwhile, in last November's Autumn Statement, it was announced that a response to a consultation the Treasury ran between July and September on pensions tax relief would be revealed in the next Budget.

However, Aegon warned that, although the company supported a single rate of relief, if there was a change to the rate, the pensions industry may struggle to adjust by April 2017.

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