A new pensions initiative announced by Pension Commission chair Adair Turner may be rendered ineffective, the Association of Chartered Certified Accountants (ACCA) announced.
Mr Turner outlined plans to introduce lump sum incentives for people who delay claiming their state pension for five years.
The ACCA said this would be ineffective unless tax breaks are introduced, as the lump sum could be subject to heavy taxation by the government.
Chas Roy-Chowdhury, head of tax at the ACCA told the Daily Mail: "Why tax the lump sum at all if you really want it to act as a proper incentive?"
He said the ACCA had hoped the lump sum payments would be exempt from tax, but now they will be taxable at anything up to 40 per cent.
Mr Chowdhury warned that the move could indicate that all pension lump sums may be taxed.
The new scheme is one of a number mooted by the Pension Commission in an attempt to boost pension saving levels in the UK.
The Pensions Commission is reviewing the UK private pension system and long-term savings to assess its effectiveness and make recommendations for change.
The Commission published its first report last year. They consulted with government, industry and individuals regarding possible ways forward, and will publish their second report in the autumn.
ACCA warns about tax on pensions lump sum
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ACCA warns about tax on pensions lump sum
Fri, 27 May 2005
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