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11

Cutting pension tax relief would hit investment and saving, says CBI

Open-access content Thursday 29th November 2012

Business leaders have warned Chancellor George Osborne that any cut to pension tax relief for higher earners in next week’s Autumn Statement would be an income tax, not a wealth tax.

2

Media reports have claimed Osborne is considering reducing the annual amount people can save towards their pension tax-free, which is currently £50,000, to increase government revenues by up to £1.8bn.

However, CBI director-general John Cridland today claimed that this would have a negative impact on small business investment and work against efforts to encourage people to save more for retirement.

'Lowering the threshold below £50,000 is not a wealth tax - it's an income tax which would hit swathes of middle-income earners,' he said.

'This would hit small business owners who invested heavily in their companies in the early years so back-load pension contributions to the end of their working lives, particularly hard.'

Cridland added: 'It would also be a major blow to professionals saving in defined benefit schemes - like senior nurses, retail store managers or gas engineers ­- who get a pay rise or a promotion.'

In its Autumn Statement submission to the chancellor, published today, the CBI also called on the government to address the 'chilling effect of mis-priced pension deficits' by changing the way pension schemes calculate their liabilities. Companies are having to 'unnecessarily' pump money into their pension schemes, to the detriment of their ability to invest in their business, it explained.

'Demands for additional cash are driven by pricing models that use current depressed gilt yields to price liabilities - effectively assuming the current gilt rate persists indefinitely,' it said. 'While this may be justifiable actuarially, economically speaking it leads to a pro-cyclical effect that chills businesses ability to invest for growth.'

The government should take 'swift action' to introduce a sustainable growth objective for The Pensions Regulator which would encourage it to elevate economic concerns. It was also urged to 'follow the lead of governments around the world' by allowing the smoothing of gilt rates over 10-15 years in liability calculations.

This article appeared in our November 2012 issue of The Actuary .
Click here to view this issue

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MPs call for urgent action on flood insurance 'impasse'

The Commons environment, food and rural affairs committee has called for ‘clear answers’ from the government about how it plans to ensure properties at risk of flooding can secure insurance in the future.
Thursday 29th November 2012
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Pension charges code of conduct launched

A code of conduct that aims to enable employers to choose the best pension for their staff by encouraging pension providers to clearly disclose the charges and investment costs associated with their schemes has been launched today.
Wednesday 28th November 2012
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Over-50s 'underestimate longevity and overestimate pension income'

People nearing retirement are under-estimating how long they will live and are either overly optimistic or have no idea how much the retirement income will be, according to research published by the Institute for Fiscal Studies today.
Friday 30th November 2012
Open-access content
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High growth countries face $168bn 'insurance deficit', says Lloyd's

Low levels of insurance take-up in fast developing economies mean governments are being left over-exposed to the cost of natural catastrophes, Lloyd's of London said today.
Tuesday 27th November 2012
Open-access content

Most people will stay in pensions under auto-enrolment, says DWP

More than two thirds of people plan to remain in a workplace pension scheme once they are automatically enrolled into it, according to research published by the Department for Work and Pensions yesterday.
Tuesday 27th November 2012
Open-access content
2

Flood insurance talks have reached an impasse, says ABI

Talks aimed between government and the insurance industry which aim to ensure homeowners at high-risk of flooding can receive affordable cover have reached ‘an impasse’, the Association of British Insurers claimed today.
Monday 26th November 2012
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