Budget proposals pose threat to pensions

Hymans Robertson, the leading independent pensions and benefits consultancy, has come out in support of the Treasury Select Committee's call for the Government to monitor the effect of removing higher tax relief on pensions contributions:

Brian Nimmo, partner at Hymans Robertson said: "We welcome the Treasury Select Committee's call as it is clearly heeding the warnings from the pensions industry. The Chancellor's plan to introduce a large tax disincentive for higher earners paying into a pension scheme will have unintended consequences for the wider population - those who were not intended to suffer from these changes will be the ones who will suffer most. It is clear that the Treasury has not thought this measure through.

"In effect, the Chancellor's proposal is a ‘double-whammy'. Firstly, higher earners' pension contributions and retirement income will now be taxed at higher rates. Secondly, employer contributions will now be taxed as a benefit in kind. This will mean an overall tax charge of more than 100% on individual contributions. The net result will be to drive higher earners from pension schemes because the disincentives for staying are simply too high. In the end, it is lower earners who will suffer - those earning far less than £150,000 - since key company decision makers are less likely to keep a pension scheme open if they themselves are not paying into it."