Pensions tax relief could be scrapped once AE is fully embedded – Altmann

Written by Natalie Tuck

The government may abandon pensions tax relief once auto-enrolment is “accepted and well embedded”, a former Pensions Minister, Ros Altmann, has said.

Speaking at the Festival of Financial Planning in Birmingham, 7 November, Altmann was asked where she sees the future of tax relief heading.

“I would expect from 2019 onwards once auto-enrolment is fully rolled out there’s a good chance it will be made compulsory and there will be no tax relief. The incentive will be the employer contribution,” she answered.

Instead, Altmann believes to save “significant sums of money”, the government could use the employer contribution as the justification for the big incentive, and then focus any spending on encouraging people to contribute more than the minimum.

“Quite frankly the incentive of basic rate tax relief, for the majority of the workforce is far lower than the incentive of the employer contribution,” she added.

However, another former Pensions Minister, Steve Webb, said he would be surprised if that happens.

“In terms of where we are going, I think the inexorable switch from pensions to ISAs would be the most obvious trend. So raising ISA limits, squeezing pension limits, it’s happened six times in the last seven years. That way you could end up with a situation where you only got tax relief to build up a pension enough for someone with a national average wage, and everything else would be ISAs.”

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