Heavy speculation surrounding the possibility of the Chancellor raiding pension tax relief in this week’s Autumn Statement has seen the Institute of Directors condemn such a move as counter-productive.
It warns that large swathes of the public have already given up on pension saving.
Midlands chairman John Rider warned: “The Government’s pensions actions are not linked up. Forcing employers to provide schemes while at the same time making them less attractive is not the answer.”
He went on: “Aggressive action by successive governments to siphon cash from the nation’s pension pots has shattered the public’s faith in saving for retirement.
“Further attacks on the remaining reliefs will weaken the stability of pension funds and simply restate the message to pension savers that they might as well not bother. If the Government want people to put money aside for retirement, then they should provide stability of policy and a reassurance that if you do the right thing you won’t have your money grabbed by a hungry Exchequer.”
Earlier this year, an IoD report cautioned that the public were abandoning pensions as a saving model, paying almost twice as much into ISAs as into pensions.
However, the Institute does accept that the Chancellor is in a difficult position.
Mr Rider said: “The global economy has been much rockier over the last two years than most people expected; growth has been weaker and public borrowing higher than we hoped. Some are calling on George Osborne to abandon his targets and embrace bigger deficits, but he must hold his nerve. It is only through controlling public debt that Britain will retain the confidence of the markets and create strong foundations for recovery.”
The IoD’s wish list for the Autumn Statement includes more infrastructure spending, and a real term freeze on road fuel and air passenger duties.
But, ultimately, it wants a far more radical approach.
As part of a ten page message released tomorrow, it claims: “The UK tax system is hopelessly complicated and in desperate need of major reform. The IoD has advocated a flat rate of 30 per cent on all income. This would make tax collection much cheaper, reduce evasion and hugely boost the UK’s competitiveness. In order to achieve this, public spending should be gradually reduced to 33 per cent of GDP.
“Pending major reform, the Chancellor should commit to tax reduction in the medium term. Corporation tax should be brought down to 15 per cent to give the UK a real competitive edge, while the boundary for the higher rate of tax should be raised from its current low level. In addition, the highest rate of income tax should be reduced to 40 per cent or lower.”