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Current pension tax system too complex for people to understand

Saga

1 min read Partner content

Gareth Shaw, head of consumer affairs at Saga Investment Services, responds to Osborne's plansto cut pensions tax relief.

It is clear that the current system is too complex for people to understand, and the distribution of tax relief is too far skewed towards the highest earners. With millions more people due to be enrolled into pensions - many of whom are the lowest-earners - it is necessary for the government to address the rising cost of tax relief, and create a simpler, fairer system.

In doing so, it must stay focused not on the potential bounty that could come with reducing the rate of tax relief but instead on its stated aim of strengthening the incentive to save. A single rate set too low and in combination with the already-planned reductions to the lifetime allowance puts consumers' willingness to save into a pension in jeopardy.

The Chancellor is expected to plough ahead with this change, and he could make a single rate look far more attractive by canning the lifetime allowance. By doing so, he gets what he wants and still gives consumers the ability to build up a healthy nest-egg for retirement.

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