UK - Tax plans may be scuppered by firms increasing payments into occupational pension schemes, Watson Wyatt claims.
Contributions to schemes have risen by more than a quarter over the last year, figures from the Office of National Statistics show – partly due to employers injecting capital sums into their funds to cover deficits.
But Watson Wyatt says this will reduce corporation tax receipts and could lead to a knock-on rise in income tax.
Figures released by the ONS show that total contributions to self-administered pension funds for the first quarter of 2004 were £8.4bn – up 25% on the same quarter last year.
Employer contributions made up £7bn of that figure and were up 29% on the same quarter last year, while employee contributions went up 9% to £1.4bn for the same period.
Watson Wyatt senior consultant Stephen Yeo said: “We are now seeing the consequences of past poor investment returns working their way through to pension contributions being paid by employers.
“If this trend continues, one effect will be to reduce corporation tax receipts.
“If company pension contributions rise by £10bn in a year, the lost revenue to the Exchequer is roughly equal to an extra penny on the rate of income tax for everyone.”
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