UK - Industry figures fear the government will use the pensions green paper to launch another assault on tax-free lump sums.
This flies in the face of Chancellor Gordon Brown’s pre-Budget statement which tried to quash speculation that the government intended to tax lump sums over £50,000.
He said the green paper would contain proposals to simplify the tax treatment on pensions and that the tax–free lump sum and tax relief on contributions would remain in place.
But industry figures remain unconvinced by Brown’s attempt to reassure the industry.
Hargreaves Lansdown pensions development manager Tom McPhail said Brown had side-stepped the issue.
He said: “Brown has a track record for verbal gymnastics. It has been well documented that he imposed the 1% National Insurance charge having stated there would be no rises in tax.
“We know the Revenue was looking at the tax-free cash this summer. Pickering indirectly looked at the question of tax-free cash, Sandler highlighted concerns about taxation-biased products, so there are strong themes set there for change.”
Sources close to the government have revealed that the green paper might not even meet its December 17 deadline.
One prominent figure said actuaries were still at loggerheads with the government over how to reform the MFR and improve protection for members when a scheme goes into wind-up.
Deloitte & Touche head of investment services Tony Osborn-Barker said the recent cases of members losing benefits due to the MFR – in particular ASW – had pushed everything back and there was a good chance the paper’s release might slip into the new year.
“There are too many other things being considered by other departments to get a nice consensus,” he explained.
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