London: Britain’s government should not reduce the amount workers can pay tax-free into their pension because it would deter future generations from saving for their retirement, a UK pension trade body said on Saturday.
The National Association of Pension Funds (NAPF) has warned British finance minister George Osborne to leave pension tax alone ahead of his Autumn Statement next week, which outlines the government’s plans for the economy.
Osborne is struggling to reduce the government’s deficit amid sluggish growth and may reveal plans to raid the pension contributions of richer Britons in his address on December 5.
Workers can currently pay up to £50,000 a year into their pension pots before it is taxed, but the NAPF believes the government wants to cut this back to £30,000 a year.
The UK government slashed this annual allowance from £255,000 pounds to £50,000 pounds in April 2011.
“If the Chancellor (of the Exchequer) goes ahead, it’s not just the rich who will be affected, but also middle earners,” Joanne Segars, NAPF chief executive said in a statement.
The UK government has already increased the minimum retirement age and reduced benefits for new workers in a bid to ease the pressure on its finances.
Currently, millions of workers will be forced to work beyond retirement or increase the amount they are saving, the NAPF said on Thursday..
The government is considering a new type of pension scheme to encourage more people to save for retirement.
Meanwhile, the NAPF wants the government to make allowances for UK pension funds to help alleviate the impact on their coffers from repeated rounds of quantitative easing (QE) from the Bank of England.
Over the last three years, £375 billion of QE has contributed to a sharp drop in the yield on British government gilts — a staple investment for pension funds — increasing workplace pension deficits by £90 billion pounds, the NAPF said.
The NAPF also wants the government to tweak mandates to allow pensions funds to invest in infrastructure more frequently, and to issue more long-dated and indexed-linked gilts to help pension funds reduce their deficits.