Experts react to potential changes in pension tax relief

Oliver Gill
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Germany Faces Aging Population
Experts are divided on whether changing the current pension tax system is a good idea (Source: Getty)

Hints that the government intends a pension tax shake-up has led to mixed reactions from experts.

Chancellor Philip Hammond's parliamentary private secretary, John Glen MP, responded to questions at the Conservative Party Conference on whether the government intended to change pension tax relief.

"There needs to be some serious examination about how we can re-balance incentives towards the lower income strata of our society," he said.

Read more: New Lifetime Isa details do nothing to solve its conflict with pensions

Glen also did not rule the idea of introducing an age-based tax relief system.

"There is a massive advantage to incentivising young people because the pressures on expenditure for them are much higher. So therefore to create an incentive that is significant... is clearly a very good policy driver," he said.

Glen's comments drew a frustrated response from pension firm Royal London.

"Royal London is strongly opposed to any further government tinkering with pension tax relief. Age-related tax relief might provide an incentive for younger savers but could hinder understanding and appreciation of the tax incentives for the population as a whole.

"If the system is to be changed then this should be as a result of proper research and consultation and where possible, avoid adding any further complexity, however well-intentioned," said pensions specialist Fiona Tait.

Read more: Lifetime Isa on a "collision course" with auto-enrolment

However, Tom McPhail of Hargreaves Lansdown took a slightly different view, especially when it came to considering an age-based structure.

"We believe there are simple, effective ways to reform pensions and Isas to support and encourage saving and investing across the whole population but particularly focused on younger workers," said McPhail.

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