This week the House of Lords Select Committee on Economic Affairs issued a report on the Finance Bill 2009 which raises concerns about the pension proposals in the Budget.

Charlotte Black, Head of Corporate Affairs at Brewin Dolphin, the Private Client advisers and Investment Managers said “As with many other advisers, we have raised a number of issues with the Treasury but are yet to see any amendment to the draconian measures announced in the Budget.  This report from the Lords agrees with almost everything we have been saying and makes good and common sense”. 

The Budget announced a reduction in tax relief for pension contributions from April 2011 for anyone with income above £150,000, but also brings in penal ‘anti forestalling’ measures immediately, which apply a penalty on pension contributions above £20,000 for a number of high earners.  “The way the anti forestalling measures work severely penalises the self employed, entrepreneurs and those who try to make use of the flexibility of the legislation introduced only three years ago.  The Lords report highlights these problems and recommends that if a workable solution cannot be found,  that then the £20,000 limit should be raised, possibly to £50,000” explains Richard Harwood, Divisional Director Financial Planning at Brewin Dolphin. 

The Lords go as far as saying ‘We question whether the anti forestalling provisions are necessary’.  They also point out that there will be three changes to tax relief of pensions in just five years. 

“The Lords also raise the point that taxing contributions as well as benefits is a major departure from previous practice and that this could be seen as the thin end of the wedge, undermining the principles of voluntary pension provision in the UK”,  said Brewin Dolphin “The government should be taking measures to encourage pension provision, not bringing in complex rules which will only deter pension saving.  They may argue that the changes affect only a few people, but it is often those business owners who make decisions on pension policy for a large number of UK employees.”

Pension legislation was reformed with effect from April 2006, the famous ‘A’ Day,  to a system which allowed flexibility and put simple limits onto contributions and benefits.  Brewin Dolphin feel that the need to change the rules so soon, adding extra complexity is either an admittance by the government that they did not write the rules correctly, despite all of the consultation that went on, or that they just see entrepreneurs, the self employed and business owners as a soft target.  This is no way to run a fair system of taxation.
 
 “Clearly, there are people within Parliament who can see that the legislation is ill conceived and unfairly penalises certain savers.  We just hope the Treasury will hear them and that when the Finance Act receives Royal ascent in July, we may have legislation which will not discourage all those we need to help the country recover from the recession and which will not undermine long standing pension principles.” Said Richard Harwood.    

                                                                              
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For further information please contact:

Richard Harwood Divisional Director Financial Planning on 0845 213 4773 or Charlotte Black Head of Corporate Affairs on 0845 213 3331