UK - Actuaries are making a last ditch bid to persuade the government to amend plans for a £1.4m cap on pension savings.
The Association of Consulting Actuaries has warned the government that the cap would undermine employers’ willingness to support occupational schemes.
Details will be included in the Inland Revenue’s pensions tax white paper, the release of which is expected to coincide with the pre-Budget statement on December 10.
The ACA fears plans for the £1.4m limit – which will be indexed to prices – will not be modified, despite industry complaints.
Within 15 years, this savings cap will catch 600,000 people, compared to government estimates of 5000, the body claims.
ACA chairman Gordon Pollock said: “Whether we like it or not the ‘law of unintended consequences’, which has dogged pensions legislation over the last 25 years, will then again come into operation.
“Executives, increasingly detached from their employees’ pension arrangements, will inevitably grow less interested in supporting them, as they will have a decreasing personal interest.
“It will be no good wishing this was not the case, this will be the reality. It is vital that pensions policy recognises these wider realities rather than it focus on justifying one narrow tax proposal.”
Hewitt Bacon & Woodrow partner Raj Mody agreed: “The concept of a lifetime limit is inevitable. But it’s absolutely right that the collateral damage it will cause to pension provision has been underestimated by the government.
“If it’s going to capture an increasing proportion of high earners – they don’t need to be mega earners – soon enough, it will eat into the corporate incentive to provide pensions.”
The ACA believes the lifetime limit should be raised to £2m and indexed to investment returns for defined contribution plans to reduce the immediate and future impact of the cap.
The ACA also said the government should vary the recovery charge for people who exceeded the limit, depending on how much they have in excess.
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