CHANCELLOR Alistair Darling’s plans to reduce tax relief on the pension contributions of high earners will do “enormous harm” to company pension schemes, according to one of the country’s most influential pensions groups.
The National Association of Pension Funds (NAPF) yesterday called on the government, which will set out more of their plans in next month’s budget, to “abandon their complex and costly proposals.”
Under current government plans, about 300,000 people earning more than £130,000 a year will not only have the normal tax relief on their own pension contributions reduced, they will – for the first time – also be taxed on the value of the contributions made by their employers to their pensions schemes.
The government estimates these measures will raise £3.6bn a year.
But the NAPF said the scheme will only bring in between £900m and £1.5bn a year, because many will simply stop saving in pension schemes.
The NAPF said they could affect many more people than just those earning over £130,000 a year. The pensions body added that the government’s plans will weaken the interest of top company executives in running a pension scheme for their staff.
The NAPF also added Darling’s plans are far too complex, probably costing 10 times the government’s estimate for implementation.
NAPF chief executive Joanne Segars said: “As recession-hit companies assess the cost of the pension they offer their employees, the government must abandon its unworkable pension tax plans that will only serve to damage pension provision.”
City A.M. Reporter