This is a proposal I’d support. Whilst giving tax relief to encourage people to save for their retirement through recognised pension schemes is a sensible approach, the current system allows disproportionate benefit to higher rate tax payers. It’s an example of a state ‘benefit’ which aids the most well-off more than the poorest.
Sadly, the rumours suggest that rather than limiting tax relief to basic rate, he will instead propose a cut off point for the maximum level of tax free contributions. Still, it’s at least a nod in the right direction, even if it limits the impact to those earning £200,000 or more a year.
It was the CBI’s response which struck me. It warned that setting the maximum pension contribution level any lower than £50,000 a year would “hit vast swathes of middle-income earners”. In short, they believe that people who are able to save £40,000 a year out of their income towards their retirement are “middle earners”. It’s hard to believe that they inhabit the same planet as the rest of us.