Insurance group calls for new flat rate of pension tax relief
The Association of British Insurers (ABI) has outlined why the introduction of a new ‘Savers’ Bonus’ – a single rate of tax relief – would prove to be a ‘fairer’ and more sustainable system for pensions savings.
The bonus, if implemented by the Government, would treat all taxpayers equally.
The ABI also hopes that the scheme would encourage more people to save for their retirements.
Currently, those with higher incomes benefit from tax relief of up to 40% or 45%. Other taxpayers only receive relief of 20%.
The ABI has suggested that the new Savers’ Bonus would ‘top up’ pensions equally for all savers. It also argues that the initiative would bring ‘simplicity’, ‘fairness’ and ‘sustainability’.
Yvonne Braun, Director of the Long Term Savings Policy at the ABI, stated: ‘The Savers’ Bonus would provide a massive boost to the average worker’s savings who is in most need of help to build their retirement pot.
‘The ABI has long called for reform to the pension tax relief system to ensure that the maximum number of people, especially those on low to middle incomes, save for their retirement.’
However, other pensions industry experts disagree with the ABI’s proposal, stating that a single rate of relief would be of little benefit to savers.
Chancellor George Osborne is expected to make an announcement regarding pensions tax relief in his Budget on 16 March. This will follow a seven-month inquiry by the Treasury into the matter.
We will be providing a summary of the key announcements from the Chancellor’s Budget, so please visit our website often.