Ian Naismith, pension market development head, Scottish Widows
YES. To remove it completely would be a big vote-loser, particularly for the Conservatives. It will be interesting to see where they do set the annual allowance, after the review, but removing it altogether would be too much of a step.
Even though it is LibDem policy to do so, I think the Conservatives will strongly oppose it because it hits too much at their core vote.
There was a genuine mood of concern amongst the life insurance industry before the election that higher rate tax relief would be going in the June Emergency Budget, but the Tories moved to allay these concerns early on. With the direct link between tax relief and tax paid already broken under Labour, there were genuine concerns, but I think that they have receded somewhat now.
But the Coalition Government may cap tax relief at 40 per cent in future, rather than 50 per cent.
Iain Anderson, chief corporate counsel, Cicero Consulting
MAYBE. This is because within the Coalition, the LibDems have committed to getting rid of it. On the other hand, for the Conservatives to do it would be an act against their natural constituency.
In advance of the Budget there was a lot of lobbying on behalf of the industry to stop it happening.
The fact the Government has gone for a limitation of contribution, rather than cutting higher rate relief suggests the likelihood of keeping higher rate relief has moved to probable from possible.
We will get more clarity on this when we have had the Nest consultation and public sector pension review completed. One of the solutions to the public sector review is to give some DC alternative, and that would require tax relief being available.
Getting rid of it altogether is attractive to the Treasury, but the Conservatives have to think how that would play out to their electorate. Wrapping tax relief up with Isas would be attractive, and build on David Willetts’ 2005 work on lifetime savings. But sweeping away the pensions regime is one big ask, particularly for a coalition
Kevin Wesbroom, principal consultant, Hewitt Associates
YES. Because the Coalition will survive for that long, and they have made clear they are committed to keeping higher rate tax relief. There is a general recognition that the behaviour of decisionmakers is influenced by whether or not they are in the scheme.
However, we could see an annual allowance at £35,000.
There are people who would like to see it go altogether, and if it was abolished, it could pay for a 60 per cent increase in basic state pension, which obviously has its attractions. Steve Webb has made no bones that he would like to see it go. He predicates everything he says with the qualification that it is on the basis of there being a realistic basic pension.
But if the idea of getting rid of higher rate tax relief does get close to reality, the Treasury will throw its hands up in the air and say it cannot deal with it. The complexity of the transitional process would be a nightmare as you would have to ring-fence every tax-relieved contribution to date. I cannot see higher rate tax going as things currently stand.
