The Treasury has asked the Office of Tax Simplification to review the tax system for pensioners, with the aim of simplifying the pensions tax regime.
In initiating the review, the Treasury has acknowledged the issues often caused by tax for people of pensionable age.
Around 5.6m people in the UK who are of pensionable age are currently in the tax system. The Treasury recognises that tax causes too many problems for this group of people who are the least able to cope with them.
In the Office of Tax Simplification review, they will be trying to identify which elements of the tax system cause the biggest problems for pensioners due to complexity. The review will also bring forward proposals to make the tax affairs of pensioners simpler.
An interim report is expected from the Office of Tax Simplification ahead of the Budget next year, with a final report and policy recommendations due to be published later in 2012.
It is worth noting that this review of pension taxation is not expected to look at the tax relief on contributions or the tax treatment of benefits arising from pension schemes. In this respect, income tax relief on pension contributions and ‘tax-free cash’ (the pension commencement lump sum) should be safe – for now!
Photo credit: Flickr/alancleaver_2000
