Warnings on impact of taxing the rich

While Australian political commentators are suggesting the Federal Government may use the May Budget to alter superannuation arrangements for high-income earners, British-based research house Datamonitor is suggesting a similar measure by the UK Government would be a retrograde step.

The Datamonitor assessment of the UK Government’s 2009 Budget referred to the eventual reduction in pension tax relief for high-income earners from 40 per cent to 20 per cent and said it not only went back on attempts to tackle the UK’s pension gap but was likely to dissuade the wealthy from saving for a pension.

It said that made it vital for providers and advisers to encourage consumers to make long-term savings and seek regular professional advice.

The Datamonitor assessment said the UK Government had announced that from April 2011 there would be a restriction on the 40 per cent pension tax relief for those earning more than 150,000 pounds a year, which would taper down to 20 per cent for those earning more than 180,000 pounds a year.

Commenting on the move, Datamonitor financial analyst Mya Myat Moe said the flow of money into the UK pensions industry would be affected as consumers came to favour more conventional bank products.

She added that high earners were likely to start looking at other vehicles in which to save, reducing the value of pensions versus non-pensions savings.