§ Lord Hanningfieldasked Her Majesty's Government:
Whether it is their policy that most savers with pensions savings of £1.5 million or more should pay higher rate tax; and whether they will review this policy in the light of the recent exemptions announced for the judiciary. [HL337]
§ Lord McIntosh of HaringeyThe Government are introducing a new simplified regime for the taxation of pensions which will come into effect on 6 April 2006. The numerous controls and limits in the existing regimes are replaced by a lifetime allowance, complemented by an annual allowance. The level of these allowances is such that the vast majority of people will be entirely unaffected by them, allowing them to save as much as they want when they want in a registered pension scheme.
An individual with pension savings in excess of the lifetime allowance of £1.5 million will be subject to the lifetime allowance charge. This has been set at 25 per cent where the excess funds are taken as a pension or 55 per cent where these are taken as a lump sum. The lifetime allowance will apply to all individuals who are members of registered pension schemes; there will be no exceptions or exemptions.
Where employers do not wish to provide benefits through a registered scheme there is a facility to set up employer financed retirement benefit schemes. These are not tax favoured.