In a response to a Freedom of Information Act request made by Corporate Adviser, the Treasury said release of information as to whether or not it considered the increased use of salary sacrifice in its original Budget policy announcement would be ‘detrimental to the policy development while it is still in progress’.
Corporate Adviser asked the Treasury whether increased use of salary sacrifice and bonus sacrifice had been factored into its figures when it calculated that the policy would lead to an increase in revenue of £320m in 2015/16 rising to £1.2bn in 2018/19. Figures from Corporate Adviser suggest the Treasury could lose revenue in the region of £24bn in the first year and more than £10bn a year thereafter if every person over 55 maximised the new tax avoidance opportunities created by the policy. The policy makes it far more attractive to pay employees over 55 through pension rather than salary as employer and employee NI can be avoided and a quarter of the payment is made tax-free. If one tenth of individuals take advantage of the new tax relief being made available, the gains cited by the Treasury would appear to be completely wiped out.
Corporate Adviser asked what assumptions the Treasury had made for increased use of salary and bonus sacrifice into pension as well as predictions for increases or decreases in costs of means-tested benefits such as pension credit, housing benefit and council tax benefit resulting from the new freedoms.
The Treasury says there is a risk that disclosure would inhibit the free and frank exchange of information about the policy. It said disclosing whether it had considered the salary sacrifice issue could have a ‘chilling effect’ on the exchange of information with the Office for Budget Responsibility. It adds that the OBR has approved its figures.
The Treasury’s FOI response says: “Having considered the public interest in favour and against release, the Treasury has decided against release of further information within scope of these questions.
“Release of costing information could have a particular ‘chilling’ effect on the exchange of information with the OBR and we consider that release of this information would inhibit the free and open discussions between the Treasury and the OBR about the cost of policies, which are needed for the OBR to do their job properly.”
A Treasury spokesperson says: ”At the 2014 Budget this Government announced fundamental changes to the way people access their pensions; a radical set of measures to support savers at all stages of their life.
“The Government wants to encourage people to contribute to their pensions and save for retirement and the changes introduced give people the flexibility to withdraw or contribute to their pension and greater access to their retirement savings.”