Chancellor rules out raid on tax perk for wealthy pension savers

PHILIP HAMMOND has ruled out the biggest pension tax raid in nearly a century after the Treasury privately admitted that “now is not the right time”.

The Chancellor’s department has reassured businesses in correspondence sent out this month that a proposed curb on wealthy pension savers will not take place for the foreseeable future.

There has been frequent speculation that Mr Hammond would claw back billions of pounds by reducing the benefits given to higher-rate taxpayers.

However, in a recent letter seen by The Daily Telegraph, Jane Ellison MP reassured the chief executive of AJ Bell, one of Britain’s biggest pension firms, that the Government would not be making any further changes to pension tax relief.

The letter said: “As you are aware, an extensive consultation was conducted last year which considered changes to the pensions tax framework. This concluded that now was not the right time to undertake significant reform.

“Given this, the Government does not think that it is necessary to convene an independent pensions commission at this time.”

Andy Bell, chief executive of AJ Bell, said the letter should give pension savers comfort that pension tax relief will not be reformed any time soon, after a period of uncertainty over the issue.

He said: “Pensions tax relief has for too long been the subject of feverish speculation. This is not helpful for savers as the threat of future changes and removal of benefits undermines people’s confidence in the pension system and puts people off saving. Hopefully the Treasury’s response to us gives people some comfort it will not subject pensions to more unnecessary uncertainty, at least during this Parliament.”

After Mr Hammond’s about-turn on National Insurance rises for self-employed workers last week, speculation is growing that the Treasury will come under intense pressure to raid pensions as a “last resort” move to fill a £2 billion funding hole.

Pension tax relief is expected to cost the Government £38.2 billion last year, up from £34.9 billion in 2014-15, ac- cording to HMRC data. Under the raid, options for which were laid out in a consultation paper last year, higher rate and additional rate (40pc and 45pc) taxpayers stood to lose their generous tax perks on pensions. It was suggested higher rates of relief could be replaced by a lower “flat rate” of tax relief which experts speculated could be set at 33pc or lower.

George Osborne, the chancellor at the time, did not go ahead with changes after lobbying from wealthy savers. However, in its formal response to the consultation, the Treasury refrained from commenting on its intentions, therefore leaving the door open for possible reform in the near future.

A spokesman for the Treasury said it still stood by the reassurances laid out in the letter.

‘Hopefully it gives people comfort the Treasury will not subject pensions to more unnecessary uncertainty’