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Proposed pension tax reforms jeopardise pensions saving, says NAPF

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Over the long-term a move to a UK pensions tax regime of either ‘taxed, exempt, exempt’ (TEE) or a single rate, will jeopardise both pension saving and the tax revenues of future governments. 

That’s according to the National Association of Pension Funds’ (NAPF) response to HM Treasury’s consultation ‘Strengthening the incentive to save: a consultation on pensions tax relief’.
 
The Chancellor may raise more tax revenue in the short-term by a change in pension tax but there is no evidence to show that savers would save more as a result of further changes to the system. 
 
The NAPF shares the Government’s desire to get more people saving more for their retirement but warns there are significant risks associated with a move to either TEE or a single rate. Instead, the NAPF urges the Government to focus its efforts on securing and building on the success of Automatic Enrolment, as we reach the crucial point for millions of small employers who are starting to enrol their employees for the first time.
 
Joanne Segars (pictured), Chief Executive, NAPF, says: “The Government must be straight with savers, schemes and employers about what it is really trying to achieve with these reforms. It says it wants to incentivise saving but it also wants to increase the revenue to the Exchequer – but these two objectives are incompatible and lead to quite different courses of action. There is a very real risk that to increase the tax take in the short-term the Government will gamble away the long-term interest of savers.
 
“Our message to the Government is clear – do not act rashly and put at risk the very real success of Automatic Enrolment. Rushing these reforms will be bad news for savers with less money going into their pension pot each month, bad news for schemes with a massive amount of additional administration, bad news for employers with a big bill to pay for all the changes and bad news for the Exchequer with less money being paid in tax in the future.”

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