The Conservatives are climbing on the public sector pension-bashing bandwagon and are not considering the restrictions already in place under the pensions tax system, says Punter Southall.
Responding to shadow Chancellor George Osborne’s proposal for a £50,000 annual cap on public sector pension payouts, Joanne Livingstone, technical director at Punter Southall says the move takes no notice of the restrictions already in the tax system and ignores the reduction in tax relief that will come in for those with incomes over £150,000.
“It is disappointing that the Shadow Chancellor George Osborne has climbed on the bandwagon for action on ‘large’ public sector pension payments without consideration of the restrictions already in force under the pensions tax system. Whilst it is true that there is no absolute cap on the amount of pension that a member can receive, the tax system is such that all the advantages of a pension are stripped away where the annual pension exceeds £87,500. His comments also make no mention of the proposed reduction in tax relief that will come into effect for those with income in excess of £150,000. From 2011, it is expected that such higher income individuals will be taxed on the annual increase in their defined benefit pension, which is likely to make pension provision highly unattractive to those affected. Imposing an additional cap on pension would simply add another level of complexity to an already over-complex system that contains the necessary mechanisms to restrict pensions for those earning more than £150,000 in its current form.”