17 December 2002
Simplifying the taxation of pensions: increasing choice and flexibility for all
This Government is committed to enabling all pensioners to share fairly in the rising prosperity of the nation. Key to this is enabling people to plan effectively for retirement. But for too many people, pension planning has been an incomprehensible maze. In particular, the complexity of the current tax rules have made pensions hard to understand even for experts.
There are currently no fewer than eight different sets of tax rules in use for pensions, imposing unnecessary inflexibility, driving up costs, and – worst of all – discouraging people from saving.
So in Simplifying the taxation of pensions: increasing choice and flexibility for all the Government is setting out proposals for a radical simplification of the tax rules for pensions, sweeping away the existing pension tax regimes, and replacing them with a single lifetime limit on the amount of pension saving that can benefit from tax relief.
These proposals for radical simplification will enable people to make clear and more confident decisions about pension saving. They will mean far greater individual choice and flexibility about when and how much to save in a pension. And they will reduce administrative burdens on employers and pension providers alike.