5th December 2012

Letter to Chancellor

According to the press, you are considering changing, yet again, the rules concerning pension contributions and tax free cash. This is daft, on a number of fronts.

It is unfair - people should be taxed on income when they receive it. Contributions to pensions are essentially a deferment of income, and should be taxed only on receipt of pension income, as they are now. To disallow higher rate tax relief on pension contributions would, effectively, be to tax those contributions twice.

It is prohibitive - why would anyone contribute to a pension and only get 20% tax relief, when they will pay 20% income tax (or maybe more) on the pension in payment? There would be absolutely no point in tying up money until at least age 55 without some tax advantage.

It is confusing - I have been involved in financial services since 1994 and I am having difficulty remembering a year in which there was not some change to pensions regulations; certainly the last five or six years have seen changes every single year, sometimes within a year, and sometimes to the same rule. Financial advisers have trouble keeping up; how do you think our clients feel?

If you don't want people investing in pensions, why not just say so, and throw out the most successful private pension programme in Europe, which has more money in private pensions than the rest of Europe put together.

I would urge you not to sacrifice the long term future of UK pension savings for the sake of short term political expediency.

Yours sincerely 

Adviser Letter of the Week