Personal Accounts, due for introduction in 2012, could be helped by the reduced tax relief announced in the Budget 2009, says HamishWilson.

The bespoke pensions advisory service has added its name to the list of companies condemning the planned cuts to tax relief on pension contributions for those earning over £150,000 per year, and says it could kill pensions.

"The Government seem to have overlooked it was not tax relief - rather tax deferral," explained Hamish Wilson, managing director. "So the proposal amounts to double taxation for high rate tax payers. If this is to be avoided, it would be necessary to issue high earners a 'tax credit' which could be used to reduce their higher rate tax liability when their pensions came into payment. This approach would allow adherence to the original principle, while at the same time accelerating tax revenues for the 'cash strapped' public finances."

Wilson said this would be complicated to administer and goes against the principles of
simplification as introduced in 2006 on A-Day.

"The planned move to cut tax relief will kill pensions for high earners as they will seek to avoid pensions and instead structure their remuneration in more tax efficient ways."
Wilson is concerned that this will lead to pensions 'dying out' for others too, and suggested that the real agenda of this is to lead to more 'dumbing down' of Personal Accounts.

"We would encourage sponsors urgently to consider what measures they will need to take, should the proposals come into place. We are asking our clients, firstly, to jump on the bandwagon with us and speak out against these outrageous proposals and the added burden on the pensions industry. Secondly, we are suggesting to them that, if this does happen, to start to consider other forms of remuneration for their higher earners."

- Pensions Age May 2009

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