LONDON (Reuters) - The government could change the amount workers can pay tax free into their pension as it looks for ways to rein in the public deficit, the pension minister said on Tuesday.
Steve Webb declined to confirm rumours, however, that Chancellor George Osborne would announce changes to pension tax on Wednesday in his Autumn statement, which will outline the government’s plans for the economy.
The UK government cut the amount workers can pay tax-free into their pension from 255,000 pounds to 50,000 pounds in April 2011, and some press reports have suggested this will be cut back further to around 30,000 pounds.
“It’s understandable why the government would look at this space,” Webb told delegates at a meeting of the National Association of Pension Funds.
“Constant chopping and changing isn’t helpful, but we do live in extraordinary times,” he said, referring to the massive deficit that Osborne is tasked with reducing.
Webb estimated the Department for Work and Pensions takes “something like 12 million pounds” a year from the incomes of low earning Britons and “wholly focusing on the people at the bottom of the pile rather than people at the top of the pile is difficult to keep doing”, he said.
The NAPF said on Saturday a further cut in the tax-free allowance would undermine public confidence in saving for retirement.
Reporting by Sarah Mortimer; Editing by Mark Potter