Treasury 'misunderstands pension tax'

Tuesday, March 23rd 2010

If the government freezes schemes outside the basic state pension it could have a "modest" effect on most Britons.

This is the view of pensions expert and partner at Pinsent Masons Robin Ellison, who said that the UK pension system is not fit for its purpose due to its complicated nature.

"The Treasury have completely misunderstood how tax works on pensions and are virtually taxing pensions out of existence. The system is completely wrong," he claimed.

Mr Ellison advised people to ask whether or not the Retail Price Index (RPI) increases will be worrying for pensioners.

According to the chancellor's pre-budget report, the RPI was negative for the majority of 2009, which helps essential goods become more affordable.

He also revealed that the basic state pension will rise by 2.5 per cent in April.

Mr Ellison said the Treasury would be wise to turn the four state pensions into one and offer a higher level.