Rachel Vahey, Head of Pensions Development, comments on the announcement in today’s Budget

Rachel Vahey, Head of Pensions Development, comments on the announcement in today’s Budget

“The Government has announced it will restrict pension tax relief for people earning more than £150,000 a year from April 2011.

“This undermines the A-day agreement which was designed to promote long-term pension saving, using the standard Lifetime Allowance to prevent abuse of the system by the rich. That major overhaul of the pensions tax rule was meant to last 30 years rather than three years. Pensions are for the long term so consistency is essential to give people confidence to plan for the future.

“Reducing tax benefits may seem a relatively easy way of raising cash but today’s changes send a message that goes wider than the people directly affected. We can’t afford a vicious circle of less engagement with pensions leading to increased temptation for politicians to cut their value. Pensions are still a good deal but the more the Government alters the rules the less trust people will have in pension saving going forward. Boosting pension saving will not only help the economy in the long term, it is one of the best ways of securing an income in retirement for our ageing population. Tax incentives encourage people to save for retirement to allow them be self sufficient and grow old with dignity.”

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