OTS urged to adopt 'realistic' approach to simpler pension tax system
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The Association of Consulting Actuaries has said it supports any "sensible" initiatives to simplify the pensions tax system and "make it easier for individuals to save for retirement".
The ACA made the comments as part of its response to a call for evidence by the Office for Tax Simplification in a third-party data reporting review.
The ACA made the comments as part of its response to a call for evidence by the Office for Tax Simplification in a third-party data reporting review.
Karen Goldschmidt, the ACA's pensions taxation committee chair, said that for schemes where tax relief is given via relief at source, currently higher-rate taxpayers get part of their relief on their personal contributions by claiming from HMRC via their tax returns but that many miss out due to ignorance or inertia, with an estimated £750m in relief lost to savers.
"A change so that the schemes pass individual contribution information to HMRC would mean these savers get their rightful pensions tax relief automatically and/or earlier," said Goldschmidt.
"A change so that the schemes pass individual contribution information to HMRC would mean these savers get their rightful pensions tax relief automatically and/or earlier," said Goldschmidt.
“However, any changes that OTS proposes must be realistic, manageable and proportionate and not result in inappropriate administrative burdens for employers and pension scheme providers," she stressed.
Goldschmidt warned that changes to try to enable HMRC to take over automatic management of "the infamously complicated" annual allowance "are unlikely to be practical or worth the information burden that would be involved especially for defined benefit savings".
She said any OTS proposals need to recognise that government may well overhaul the pensions tax regime soon, "and any regime change from the government needs to learn from the AA challenges and be deliverable without creating huge administration burdens”.
Goldschmidt warned that changes to try to enable HMRC to take over automatic management of "the infamously complicated" annual allowance "are unlikely to be practical or worth the information burden that would be involved especially for defined benefit savings".
She said any OTS proposals need to recognise that government may well overhaul the pensions tax regime soon, "and any regime change from the government needs to learn from the AA challenges and be deliverable without creating huge administration burdens”.
