Flat-Rate Pension Is Fair According To Insurance Industry
According to the Association of British Insurers (ABI), pension contributions need an overhaul towards flat-rate tax reliefs. The association said it guarantees fairness to everyone, especially those at the lower area of the spectrum.
The ABI is lobbying to Chancellor George Osborne that a Savers’ Bonus allows the insurance industry to cater fairly to everyone.
Currently, higher incomes benefit from 40 to 45 per cent tax relief while those at the lower end only receive 20 per cent. The flat rate, according to ABI, allows ordinary workers to save more and reduce taxes on their pension contributions.
However, the Pensions and Lifetimes Savings Association said flat rates of about 25 to 20 per cent would only produce little benefit to low-income workers. Higher rate taxpayers may also find the allure of a 40 to 45 per cent tax reduction on pensions saving lost with a lower tax relief rate.
The aim for the changes in tax relief rates for banks, according to Treasury Minister David Gauke, would be to introduce and encourage saving for UK workers and pensioners.
ABI Director of Long-Term Savings Policy Yvonne Braun said the Savers’ Bonus guarantees a boost to the average worker’s savings. It would also simplify the entire tax relief process for all types of pensioners.