UK - Schemes are "reluctantly" prepared to accept the £1.4m lifetime savings cap as the price the industry has to pay for pension simplification.
Schemes and consultants say they are resigned to “living with” the government’s proposals to ensure the Inland Revenue pushes through with its ambitious tax simplification plans.
The National Association of Pension Funds said it would “reluctantly accept” the cap.
A spokesman said: “We don’t think the limit is necessary and the people most likely to be affected by it are often those making decisions about the future of occupational pension provision. If they feel they might lose out as a result, they will be less inclined to keep the scheme going.”
Chancellor Gordon Brown threatened to scrap the tax simplification proposals if there was no “consensus” on the limit, following a further three-month consultation by the National Audit Office.
Mercer Human Resource Consulting worldwide partner Peter Thompson said: “The cap may not be ideal, but what we have at the moment is a mess and [simplification] will be the basis of a significant improvement.”
Electricity Supply Pension Scheme secretary Tony Allen agreed. He said: “We don’t propose to argue further against the cap.
“The number of people affected is not large enough to risk losing out on the simplification changes.”
But Hewitt Bacon & Woodrow urged the government to consider alternatives. In its report sent to the Revenue, the consultant said: “We remain concerned that many senior decision-makers will no longer have an incentive to ensure that employees are provided with good pension arrangements.
“We have suggested modifications to the Revenue which address this issue without compromising the overall approach being proposed.”
The findings of the NAO review are expected this month, after which the measures will be included in the 2004 Finance Bill and introduced in April 2005.
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