The consultation into pensions tax relief has cost the Treasury around £1.5 billion in additional pension tax relief as high earners rush to buy now while stocks last says Sipp provider AJ Bell.
Pension savers have poured billions of pounds into pensions in fear of pension tax relief being curtailed or abolished in the forthcoming budget. Providers report a 40 per cent increase in personal contributions, due to the threat of a cut to tax relief, representing a £3.6bn increase on last year’s £9bn contributions. Basic rate relief of £0.72bn is already included in that figure, but higher rate taxpayers – who would be the people making contributions – would have reclaimed a further £0.72bn.
AJ Bell chief executive Andy Bell says: “The Government’s plan to reduce the cost of pension tax relief could have backfired spectacularly. Far from saving money, the uncertainty created by the consultation and scare stories from former ministers has led to a surge in pension contributions and there will be a heavy cost to this for the Treasury.
“This re-affirms my long held view that trusting politicians to make significant policy decisions on pensions tax relief is like trusting a troop of foxes to babysit a brood of chickens.
“The pension saving public would be better served by an independent Pension Commission with a mandate to manage UK pension policy and provide certainty and confidence to savers.”