A flat rate system of 30 per cent tax relief on pensions should be implemented for all workers, Minister for Pensions Steve Webb has said.

Speaking to the Daily Mail, Webb said the introduction of flat rate tax relief on pensions is a policy that should apply for all, no matter what salary workers are earning.

“Most people get 20 per cent relief, some people get it at 40 per cent”, he said. “But the people who get it at 40 per cent get shed loads.”

“If you gave everybody 30 per cent then that spreads it much more evenly. Clearly that is not government policy, it is not even Lib Dem policy yet – but I’m working on that. Personally I can’t see why we don’t have a much simpler system. And in that world, you probably don’t need a lifetime allowance.”

Webb said lifetime limits on the amounts savers can put aside could be axed.

“The lifetime allowance is a funny thing because it doesn’t just say if you pay in more than this you don’t get tax relief, you actually have a penal rate of tax,” Webb argued.

“So to actually say we will punish you if you go beyond our limits seems illiberal to me. If people want to put more money in to a pension we shouldn’t stop them.”

The Pensions Minister said there are also plans to provide new savers with estimates of how long they are expected to live in retirement.

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