Brown Likely To Forge Ahead With UK Pension Tax Reform

by Robert Lee, Tax-News.com, London

11 March 2004

Chancellor of the Exchequer Gordon Brown is expected to go ahead with proposals to simplify the taxation system surrounding pensions when he announces the government’s budget next week.

It is expected that the major feature of the reform will be a £1.4 million cap on pension savings, a move that the Chancellor claims will only affect a tiny minority of highly paid individuals. However, whilst Brown estimates that only 5,000 people will be adversely affected by the move, members of the accounting profession believe the figure could be closer to 600,000.

The Treasury has justified the radical changes by claiming they will “sweep away the complexity of the system”, the only beneficiaries of which at the moment are “accountants and advisors.” Officials also claim that almost 60% of directors working for firms in the FTSE 100 already have some kind of pension cap in place on the amount they can claim in tax relief on their contributions.

Nevertheless, experts contend that firms will have the ability to circumvent the rules by paying executives' pension provisions in the form of cash sums.

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