The Government should abandon its complex and costly proposals on the tax treatment of pensions contributions, says the National Association of Pension Funds (NAPF), and drastically reduce the annual allowance for tax-favoured pension contributions from the current £245,000 to somewhere between £45,000 and £60,000 at its last budget.

This, the NAPF said, would work with existing pensions tax policy and mean the government can raise additional tax revenues. It would also eliminate some of the 'arbitrary' and unfair consequences of the proposals from the Government.

"The next twelve months will be critical for UK pensions," commented NAPF chief executive, Joanne Segars. "It is essential that the Government makes the last budget of this Parliament (one) for pensions.

"As recession-hit companies assess the cost and complexity of the pension they offer their employees, the Government must abandon its unworkable pension tax plans that will only serve to damage pension provision in the round."

The NAPF claims that its research shows that the Government's proposals are likely to disengage senior company pensions decision markers from pensions, which could further undermine pension provision across the income scale if schemes ultimately close.

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