Manifesto reaction: industry concerned by tax relief proposals

Industry figures have voiced their concerns on tax relief proposals, following the publication of several political party manifestos.

Barnett Waddingham senior consultant Malcolm McLean said the Labour and Conservative wish to reduce pension tax relief to higher earners, with earnings above £150,000, complicates the payroll operation and “for the first time breaks the link between tax rates and tax rate reliefs.

“I fundamentally disagree with the proposals from both Labour and the Conservatives to reduce the Lifetime Allowance to £1m given that this will hit those with DC plans of £27,000 per year – hardly rich earners. The punitive tax of 55 per cent is also unwise, unfair and unnecessary,” he said.

Broadstone technical director David Brooks described the manifestos as a “mixed bag” and surprisingly light on pensions detail. Speaking on tax relief, including the IHT giveaway from the Conservatives, he said the general public may find it hard to garner sympathy for high earners.

“Any complication of the system in these ways should be consulted on and we would urge either the Conservatives or Labour to consult with the industry to canvass views on the most appropriate methods for changing tax relief. The Liberal Democrats to their credit suggested a review of tax relief with a view to implementing a flat-rate tax relief,” he said.

Talbot and Muir head of technical support Claire Trott said there seems to be a general lack of commitment to the pension reforms.

“Any change to the tax relief systems at this stage will deter savers in the long run and this kind of tinkering has been the kind of changes that has historically put people off investing in their future,” she said.

Intelligent Pensions marketing director Andrew Pennie said the party manifestos of all parties show that pensions will continue to be a political weapon to fund pledges made in other areas. He stated the main area of focus is on pension tax relief with Conservatives, Labour and the Liberal Democrats all favouring change.

He said the Conservatives and Labour are looking to reduce tax relief for people earning over £150,000, the same people who are most likely to be caught by the reducing lifetime allowance.

“This brings back memories of the last Labour government’s ‘special annual allowance’ and ‘anti-forestalling’ measures which were so complex that even the parliamentary draughts men struggled with them. And what will happen with members of final salary schemes? If you are earning more than £150,000 then your annual input is likely to be at least £40,000,” he said.

Pennie said the Liberal Democrat idea to introduce a flat rate tax relief of 33 per cent is “clearly more attractive to basic rate tax payers and would encourage those on lower incomes to save more for their retirement,” he added.

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