UK Chancellor Gordon Brown is to press ahead with his plans to reform the taxation of pensions in the United Kingdom, despite growing controversy over his claim that “only” 5,000 people will be affected by a proposed cap of 1.4 million on lifetime pension savings.
Pension consultants have suggested 60,000 people will be affected, and the National Audit Office on Tuesday gave a distinctly qualified endorsement to the 5,000 figure. It suggested 10,000 might be affected, but gave the estimate under the shadow of a threat from Brown to abandon the entire reform if it did not back his figure.
The National Association of Pension Funds and the Association of British Insurers support the reform, but the Confederation of British Industry – whose counsels are dominated by well-paid industrial executives – seized on the National Audit Office data as necessitating a reassessment of the numbers of people affected by the proposed lifetime limit on pension savings. It said agreement on the figures was an important first step to resolving remaining problems.
“Now that we have the figures agreed, we can focus on getting the benefits of simplification while ironing out the remaining problems,” says John Cridland, CBI Deputy Director-General. “It was the government’s constructive amendments to its provisions that have helped bring the numbers down. Even so, the NAO endorses the concern of business that the figures could be higher than the 5,000 or so the Treasury suggested. For the avoidance of doubt, the six figure estimates were only ever a projection of what could happen in 30 years time as a result of the limited indexation provision. This is not the question that the NAO has addressed today. Now we need to find ways of safeguarding the reasonable expectations of people currently not capped as a result of working for the same employer since before 1989. There will also need to be periodic uprating of the cap beyond inflation to prevent it withering on the vine. Otherwise the current earnings cap of 99,000 will have an effective value of only 50,000 in 30 years time.”