David Jetuah, Accountancy Age, Friday 27 August 2010 at 09:45:00

FTSE 250 company partially backs government pension proposals but urged evenbolder amendments to be made

Hargreaves Lansdown has partially backed government proposals to overhaul thepensions tax regime, but also suggested further adjustments.

The FTSE 250 investment company said government plans to reduce the AnnualAllowance from 255,000 to around 40,000 and to reinstate marginal rate taxrelief were "infinitely better" than Labour?s attempt to restrict pension taxrelief to just 20% for higher earners.

But the government risks undermining the beneficial impact of this reform byrestricting 50% tax payers to 40% pension tax relief, Hargreaves Lansdown said.

"It would be better to have an even lower Annual Allowance - 35,000 forexample ? and full marginal rate tax relief (including 50%) than to have ahigher Annual Allowance and tax relief capped at 40%."

The average contribution to a personal pension is only around 2,020 a year,so an Annual Allowance of 35,000 would still be more than enough for mostinvestors.

Hargreaves Lansdown was concerned that any difference between individualincome tax rates and pension tax relief rates created a deterrent to pensionplanning which would affect pension investors across the board.

Tom McPhail, Head of Pensions Research said: "Simplicity is the key, withoutthat all the other pension reforms will founder on the rocks of investorconfusion and disengagement."

Further reading:

Profile:Peter Hargreaves, co-founder of Hargreaves Lansdown