The Treasury has attacked in Parliament Corporate Adviser’s assessment of potential tax and NI leakage from the freedom and choice in pensions policy but postponed revelation of its own figures until the Autumn Statement.
Speaking in the House of Commons, Financial secretary to the Treasury David Gauke MP described Corporate Adviser editor John Greenwood’s suggestion to the Pension Schemes Bill committee that £2bn or more could be lost as a result of the policy as ‘eye-watering’ but ‘based on extraordinary assumptions about behaviour’.
But asked to explain what estimates the Treasury had made for the likely loss of NI and tax due to over 55s flushing salary through pension, Gauke said its predictions would only be published at the time of the Autumn Statement in December. Gauke said ‘numbers have not yet been certified by the OBR’.
The Treasury has already responded to a Freedom of Information Act request from Corporate Adviser by saying its projections were contained within the Budget papers. It did not clarify whether there are other projections not included in its FOI response, or give reasons why, if this were the case, such projections would have been omitted from that response.
Corporate Adviser editor John Greenwood last week told the committee he believed the total opportunity for NI and tax avoidance was in the region of £20bn if everyone over 55 made full use of it, and quoted research from the CA Summit where two thirds of senior DC advisers present had said they thought at least 10 per cent of that figure would be lost. The Treasury is yet to publish its own figures for the potential losses, seven months after the Budget.
Labour MP Tom Blenkinsop said: “The Minister is being very generous with his time. He is also, potentially, being very generous with the Treasury’s coffers. Mr Greenwood said that the allowance “will impact on only 2% of the population, so it is a penalty with no teeth for 98% of the population.” What is the Treasury’s forecast of the potential loss of national insurance contributions?
Gauke said: “As far as the forecast, this is an issue that the Office for Budget Responsibility will come back to at the time of the autumn statement. Mr Greenwood set out some quite eye-watering numbers in his evidence. They were based on some quite extraordinary assumptions about behaviour. All the changes resulting from the reforms that we have announced since the Budget will be announced in the autumn statement in the usual way.
“We certainly do not recognise some of the numbers that have been floated in relation to cost, but the numbers have not yet been certified by the OBR, so I cannot give the honourable gentleman the answer that he seeks at this stage. Of course we have been mindful of the impact on the Exchequer, but we believe that our proposals will not put it at risk of losing substantial sums. As I have said, we are not preventing people over 55 from drawing down part of their pensions while continuing to make contributions, or retaining the flexibility to do so. We might have closed off that option, but we decided not to.”