Pensions tax restrictions risk hurting less well-off, warn LITRG

Pensions tax restrictions risk hurting less well-off, warn LITRG

Pensions tax restrictions risk hurting less well-off, warn LITRG

The Low Incomes Tax Reform Group (LITRG) is concerned that a measure designed to restrict tax relief for wealthier pension contributors will have an undesirable side effect on low-income pensioners.

The Government has confirmed that the lifetime allowance, the maximum an individual can save in a registered pension scheme while claiming tax relief, is to be frozen at £1.8 million for five years up to and including 2015/16.

This will adversely affect pensioners between 60 and 75 who wish to convert their small pension rights into a cash sum, and can do so provided that their total pension savings do not exceed the ‘trivial commutation’ limit of £18,000.

This limit is pegged to 1 per cent of the lifetime allowance – i.e. £18,000. Thus, freezing the lifetime limit will also erode this valuable facility for low-income pensioners to commute their savings into cash.

Robin Williamson, Technical Director of LITRG, said:

“We are calling on the Government to de-couple the trivial commutation limit from the lifetime allowance and to raise it in line with inflation, so that those with very small pension pots are not put into a worse situation.”

Notes to Editors

1) The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

2) The CIOT is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities.

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George Crozier
External Relations Manager

gcrozier@tax.org.uk
D: +44 (0)20 7340 0569
M: +44 (0)7740 477374

The Chartered Institute of Taxation
Registered charity number 1037771
www.tax.org.uk

The Association of Taxation Technicians
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VAT Registration Number 497 5390 90
www.att.org.uk