Retirement planning boss backs single rate pension tax relief

A retirement planning boss believes that a single flat rate of pension tax relief could be the “boost to pensions simplification we’ve needed for a long time”. According to reports earlier this week, George Osborne is set to overhaul the current system.Mr Osborne has said he will not formally respond until the March Budget about a consultation on pensions tax relief launched last year.But the report suggest everyone would be taxed at the same rate, possibly 25%-35%, starting from around April 2017.{desktop}{/desktop}{mobile}{/mobile}While Martin Tilley, director of technical services at Dentons Pension Management, expressed deep concerns about the move earlier this week, Andy Zanelli, head of retirement planning, AXA Wealth, said flat rate pension tax relief levels the playing field.He said: “A move to a single flat rate of pension tax relief could be the boost to pensions simplification we’ve needed for a long time. Pensions need to provide an income that could last for 20, 30 or maybe even 40 years, so it’s vital we remove any barriers that prevent people from saving and investing – a complex tax system where few understand the benefit is one of them.“While moving to a flat rate system will provide some challenges in terms of system modifications and interactions with auto enrolment, it should benefit basic rate taxpayers and make saving for the long term more appealing to people who just aren’t saving enough, if at all.”He said: “Presenting the relief as an additional contribution from government will further incentivise people as research shows that matching contributions is the most effective method of encouraging savings. A single flat rate will support low and middle earners to save and would help address the gap identified where 10.9 million people with annual income below £52,000 are not saving enough.“Higher and additional rate savers will be worse off under a flat rate, however the incentive to save will not be completely removed. The benefits of a level playing field and encouraging basic rate tax payers to save more will hopefully ensure more people are financially prepared for retirement.”A Treasury spokesperson said: “The government launched a wide-ranging consultation on the system of pensions tax relief last summer. We have not decided on whether or how to reform the system and are considering all options, including retaining the current system. This consultation is now closed. We are considering the responses and will respond at the Budget.”

Retirement planning boss backs single rate pension tax relief

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