Suter argued that removing higher-rate relief would be a direct attack on middle Britain.
“It is also far from clear how a flat rate of pension tax relief would be applied to defined benefit (DB) schemes, where contributions come from pre-tax ‘net pay’,” she said.
“Any solution would inevitably see members of public sector DB schemes landed with significant tax bills as well.
“While strained public finances demand the chancellor reviews all areas of public spending, a dramatic pension tax relief raid would come with huge practical challenges and political risks. There are, however, easier ways for the chancellor to reduce the cost of pension tax relief.”
Meanwhile, Butcher added that many individuals are already reluctant to pay into their pension because they are incorrectly nervous about losing the funds on death, and reducing pension tax relief may encourage even less people to save through their pensions.
“Considering the country’s ageing demographic and accompanying social security burden, encouraging people to have lower savings in retirement will only increase the burden on the state.
“It’s important to remember that paying into a pension fund does not avoid tax, it merely defers it until pension funds are withdrawn, and so it would be wise for the government to defer some tax revenue in preparation for this mounting challenge.”
National insurance
Last year, the government announced plans to place a 1.25 percentage point increase on National Insurance contributions alongside a 1.25 per cent dividend tax, in order to pay for a £86,000 cap on the cost of social care.
The plans were dubbed a 'health and social care levy', in light of the Conservative's election pledge to not hike NI.
While advisers have called for a delay to the hike, industry commentators have largely argued that it is unlikely we will see any changes in this space.
Shaun Moore, financial planning expert at Quilter, said: “Given the considerable increase in energy bills, the sky-high fuel prices and eyewatering inflation numbers, many have called for the national insurance rate hike to be delayed or scrapped all-together.
“But a U-turn from the government at the spring statement is very unlikely. This is because national insurance is paid by everyone under state pension age, so scrapping the hike would be a saving to everyone regardless of income level.”
He argued that in fact, higher earners would benefit more from the hike being delayed, in pounds and pence terms and it therefore seems likely the government would opt instead for a more targeted fiscal measure, that would have a greater impact on lower-earners and those more vulnerable to energy price hikes.
Likewise, Lowery said: “With the National Insurance hike, which will become the health and social care levy, being part of the government’s long-term funding plans, it seems unlikely that it will be postponed – and both Sunak and the prime minister have insisted it will go ahead, to the chagrin of many Tory backbenchers.”
