The new chancellor Rishi Sunak, has dropped plans to reduce higher rate tax relief on pensions, according to reports this weekend.
Briefings suggest this change of plan comes after fierce opposition by Conservative MPs. However the report, in The Times, says that while Sunak has also ruled out imposing a new mansion tax on property, he has not ruled out an increase in fuel duty in the forthcoming Budget, expected on March 11.
There had been considerable speculation in the run up to the Budget that the government could radically change tax relief on pensions, introducing a new flat rate for all savers. If higher rate tax relief was abolished, giving higher earners just the flat 20 per cent, this would have raised around £10bn for the Treasury.
This has been opposed by many in the industry, who claim that it would be complex to administer, and could further worsen funding problems for many DB schemes, both in the private and public sector.
Many pension experts also point out that similar rumours have circulated ahead of other the budget for a number of years, particularly when there is a new administration or chancellor. This has often resulted in increased pension contributions as higher earners look to secure tax relief at 40 per cent ahead of any potential change.
The government is known to want to raise money to fund planned infrastructure projects, many of them focused on northern constituencies where the Conservatives took votes from Labour in the recent general election.
There has also be speculation that the chancellor will will loosen his fiscal rules enabling the government to borrow more to fund these projects.
