Government dismisses recommendation to evaluate impact of pension tax reliefs within next year
30 September 2020
The Government has confirmed that it will not conduct a review into the impact of pension tax relief within the next 12 months, even though MPs have encouraged this, due to the associated £38 billion cost in tax year 2018-19.
The Public Accounts Committee released a report on the management of tax reliefs, which included a recommendation for HMRC to evaluate the effect of pension tax reliefs within a 12-month deadline. The Government dismissed this recommendation, despite concerns around the monumental cost that was incurred in 2018-19.
The Treasury confirmed that it has already published a number of consultations on the topic of pensions tax relief over the course of the past few years, including an ongoing call for evidence on how it should be administered, which was launched in July 2020. It stated that these consultations were instrumental in collating views, evidence, and feedback on the effects of the relief and the impact that making any changes would have. There was confirmation, however, that it would continue to explore the tax system and identify other areas that need to be scrutinised.
The Financial Adviser reported that the Treasury had stated:
“Responses to the 2015 wide-ranging consultation on pensions tax relief indicated there was no clear consensus for reform at that time, and so at Budget 2016 the then government announced it would not make fundamental reform to pensions tax reliefs at that stage.”
Chancellor Rishi Sunak’s predecessor, Sajid Javid, is reported to have been contemplating cutting the relief for higher earners to 20%, so amendments to pensions tax relief have been on the horizon for some time.
Various debates have also been ignited that introduce a 30% flat rate of tax relief, and proposals to completely rehaul the system and provide relief at the point of withdrawal, as opposed to at the point of saving.
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