Top 1 pc get double tax relief of bottom 50pc of population – Michael Johnson

Called ‘Five Proposals to Simplify Saving’, the report, authored by Michael Johnson, reiterates arguments that tax reliefs on pensions should be replaced by bonuses on individual and employer retirement savings contributions, capped at £2,500 a year, at a rate of either 50 or 25 per cent of contributions. Employer contributions would be made into a workplace Isa would be locked in until age 60 under the plan,
Johnson also calls for the abolition of the £10,000 minimum earnings threshold for auto-enrolment, and of band earnings, and an end to salary sacrifice which he says costs the Treasury £2bn a year.
Johnson’s report argues that a bonus approach would help the low paid, particularly those in net pay schemes who are not able to access tax relief, purely because of the tax structure of the scheme they use, a situation he describes as ‘absurd’.
The report says higher and additional rate taxpayers currently benefit from 68 per cent of tax relief, with the top 10 per cent taking 40 per cent of all reliefs.
Centre for Policy Studies director Robert Colville says:“The pensions savings landscape is complex and many people are put off from adequately preparing for their retirement.
“The proposals put forward in this paper would incentivise mass savings and save the Treasury an estimated £10bn a year.
“It is vital that reforms are made so that people can access financial products which suit their needs today, and in the future.”
Michael Johnson, author of ‘Five Proposals to Simply Savings’, says:“The current system of tax relief is incomprehensible to the general public.
“Tax relief costs the Government billions each year but 68 per cent of that flows to higher and additional rate taxpayers who do not need such a large incentive to save.
“The Government should focus its reforms on proposals which do the most towards creating a broader savings base – such as replacing tax relief with bonuses on pensions contributions.”