B&CE, the employee benefits provider for the construction industry, suggests that rather than the Government focusing on saving tax relief, surely the priority should be to get the estimated 7 million who are not currently saving towards their retirement to start doing so?
In the Pre Budget Report last autumn, the Government took the decision to delay the full implementation of auto enrolment by a further 12 months thereby deferring the Treasury from having to pay tax relief for another year. This means auto enrolment will now not be fully implemented until 12 years after the Pensions Commission first published their recommendations; 12 further years in which the majority of lower to moderate earners still won’t be saving towards their retirement.
The current tax relief system appears unfair with far too much of the pensions tax relief going to the highest earners. According to the Government in the 2009 budget, those in the top 1.5 per cent income bracket currently receive 25 per cent of the tax relief.
B&CE believes a higher rate of tax relief should be given to the lower to moderate earners to encourage them to save. It suggests the Government considers introducing a flat rate tax relief of say 30% - a figure that would be reasonably fiscally neutral and would spread the tax relief more equitably.
Past research undertaken by B&CE demonstrates that over 50% of those people surveyed didn’t appreciate that the Government contributed to an individual’s pension by way of tax relief. John Jory, Director of B&CE Insurance Ltd, comments “
The Government actually receives fairly poor value for money for the tax relief it offers on pensions. Perhaps we should make tax relief more visible by sending individuals a tax relief ‘voucher’ with their annual statements detailing the tax relief they have received?”
For further information please contact:
Jo Gibbs
Communications Manager
01293 586541