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Government committed to reducing higher rate tax relief on high earners' pensions contributions


A Labour Government will keep to its plan of reducing tax efficiencies on pensions for high earners, the secretary of state for work and pensions has confirmed.

Yvette Cooper told delegates at the National Association of Pension Funds Annual Conference the Government will stick to plans announced by the chancellor, Alistair Darling, in the Budget speech, to change the higher rate of tax relief on pension contributions to a basic rate for employees who earn £150,000 or higher from next year.

But she added there would be no change on pension tax relief for lower earning staff.

Cooper said: "We have to be fair and we need to increase revenue. I think this is the fairest and right thing to do. It will be unpopular with some, but sometimes you have to make tough decisions.

"We give tax relief to give people an incentive to save [in pensions] for their retirement. There is no tax relief on other forms of saving.

"Higher earners can afford other ways of saving and through [reducing tax efficiencies for them] we can support the economy.

Commenting on speculation some employers will consider changing their pension scheme provisions because of the tax change for high earners, Cooper added: "It is implausible for employers to close pension schemes for all members because of this. Employers must make rational decisions."