Middle class savers face ‘retirement crisis’ from flat rate pension tax relief


The mass market of middle income savers will face a “retirement crisis” if George Osborne decides to introduce a flat rate of pension tax relief, Hymans Robertson warns.

The consultancy says its analysis shows 40 per cent taxpayers currently face the biggest retirement shortfall and will be worse off if the Government backs a flat rate.

While relief would be taken away from additional rate payers this is “justifiable” as they tend to be saving enough, says the firm.

Hymans Robertson partner Chris Noon says: “[A flat rate] also takes tax relief away from higher rate tax payers, which is a problem as this is the group facing the biggest savings shortfalls in retirement.”

Instead, the firm backs capping relief at 33 per cent for higher and additional rate taxpayers and retaining 20 per cent relief for basic rate payers.

It says introducing a flat rate would “not make a meaningful difference”, adding the complications of introducing a new system mean it would take years to bring fiscal benefits to the Treasury.

Noon says: “A capped rate would be a less disruptive change for employers and the pensions industry than a flat rate. A capped rate would provide a better approach for employers in managing retirement provision.

“Both they and the pensions industry are still adjusting to the changes heralded by the pension freedoms less than a year ago. The infrastructure is largely in place to implement a capped rate of relief. Introducing a flat rate, on the other hand, would create considerable upheaval and cost.”