Steven Cameron, Pensions Director at Aegon said: “Once again the prospect of reforming pension tax relief for higher earners is being floated as a means to restore holes in the government’s finances. What’s different this time is that the state pension triple lock is also firmly in the spotlight with recent earnings anomalies likely to grant current state pensioners a bumper increase next April. Reducing the savings incentive for many higher earners, while hiking the state pension could end up stoking intergenerational tensions and does raise questions about fairness.
“The speculation also highlighted the possibility of a further cut to the pensions lifetime allowance. Given this was frozen at the recent Budget any further change would be particularly punitive. The current allowance only buys an annual guaranteed income of around £1,700 a month, which is hardly going to buy a life of luxury.
“On the broader point about tax relief, we aren’t against the principle of a flat rate but any reform would need to be carefully thought through and also balanced against intergenerational considerations. There are broader challenges to reform of tax relief, as they would be highly complex to implement, particularly for defined benefit schemes. This means individuals and pension schemes would need sufficient time to adapt and we’d encourage the government to take a long-term view on the implications any changes
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