Blog: Should the tapered annual allowance for tax on pensions be abolished?
Should the tapered annual allowance for tax on pensions be abolished?
No – Luke Hildyard is director of the High Pay Centre.
Calls to scrap the pensions allowance taper are hopelessly naive and completely out of touch.
There is considerable bleating about the complexity of the taper, but it is essentially pretty simple. For the very rich, tax relief on pension contributions diminishes as they earn more, but by less than the increase in earnings so that there is still an incentive to work. Anyone affected is comfortably inside the richest one per cent of UK earners.
Much of the focus has been on how this system might affect high-paid doctors. But back in the real world, the NHS struggles to meet the needs of an ageing population; schools and social services count the cost of repeated funding cuts; youth services and policing cry out for investment with knife crime on the rise.
Scrapping the taper and the millions of pounds of tax it brings in would make these crises even more acute, while benefiting only the very rich. We are already among the countries with the worst inequality and lowest spending on public services in Europe. Worsening these unenviable records is a terrible idea.
This blog post originally appeared in City AM.
Since 1 January 2020 the average FTSE 100 CEO has earned:
Income inequality in the UK
Wealth inequality in the UK
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