UK pensions: Public opinion on how pensions should be taxed is divided, but experts agree that better education on the topic could encourage people to save more

 
Hayley Kirton
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Pensions Isa or flat-rate scheme? Who knows? (Source: Getty)

Pension experts were pretty vocal about what possible changes chancellor George Osborne could have made to pensions at next week's Budget, but the public at large is more conflicted in its feelings, research published today has found.

According to a study by professional services firm PwC, 42 per cent admit that they have no clue what the right option would be if Osborne was trying to save money on the pensions regime.

Just less than a third (30 per cent) of people support implementing a flat rate of tax relief which would likely see relief rates for higher earners slashed, while 13 per cent cent thought cutting the amount people can withdraw from their pension tax free would be the right answer.

"How pensions are taxed gets to the heart of politics and people’s thinking on taxation generally," said Kevin Nicholson, head of tax at PwC. "Is tax relief a giveaway or about letting someone keep more of their own money?"

Read more: Government urged to hurry up with pensions dashboard

However, one factor that most people agree on is that savers should not be taxed on both their contributions and their withdrawals, with just less than two-thirds (62 per cent) agreeing with that sentiment.

When PwC presented their findings to a panel of experts, including representatives from the Work and Pensions Committee, they recommended that more should be done to bolster education on pensions and to encourage people to start saving from a younger age.

Nicholson added: "Confusion and complexity are putting people off pensions and this presents huge challenges in the long term. If people are concerned about intergenerational inequality now, it’s only going to get worse. Pensions education from a young age makes a lot of sense – but you also need understandable information at every age."

Late last week, Osborne announced that he would not be introducing any major reforms to the pensions system at the Budget next week, which many thought he might do, as he was due to present the outcome of a Treasury consultation on pensions tax relief.

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