PBR 2009 - Pensions: increased complexity and cost, says KPMG
"The Chancellor's decision to restrict higher-rate tax relief on pension contributions for people with incomes over £150,000 from April 2011 was already flagged but employer pension contributions will now be included in the restrictions".
Wednesday, 9 December 2009
KPMG head of pensions Mike Smedley said:
"The Chancellor's decision to restrict higher-rate tax relief on pension contributions for people with incomes over £150,000 from April 2011 was already flagged but employer pension contributions will now be included in the restrictions.
"This will be subject to an income floor of £130,000, excluding the value of employer contributions. The move means at least an extra 50,000 people will be affected and will add to the complexity and cost of administering pensions schemes.
"Indeed, it is now difficult to imagine a more complicated pensions tax system.
"The public service pension announcement was also very confusing. The Chancellor talked in his speech about changes 'broadly in line with those offered in the private sector'. Yet the suggested savings of £1bn a year is at most 5 percent of the current spend on unfunded public sector schemes, and represents perhaps a few hundred pounds per current employee - small beer compared to the squeeze being felt in the private sector.
"The fact that the Chancellor referred to "contributions" to public service pensions is also confusing given that the majority of the schemes mentioned are unfunded! It's not clear whether this represents real and substantive change."
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About KPMG: KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with 11,500 partners and staff. The UK firm recorded a turnover of €2.2 billion in the year ended September 2008. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 148 countries and have more than 113,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. KPMG International provides no client services.