The government is being accused of imposing stealth tax on defined benefit pensions after cutting the rebate employers receive for contracting out of the state second pension.
It has been announced that members of the public who are paying into final salary pension schemes are receiving an additional “stealth tax” on their earnings as part of government reform plans.
According to the National Association of Pension Funds, plans to reduce National Insurance rebates for employees enrolled in final salary scheme with their company will place a “further squeeze on the employers trying to help them”.
Chief Executve of NAPF, Joanne Segars, responded to the accusations by remarking: “Cutting the value of the rebate will raise the operating costs of final salary schemes, and is likely to spur more employers to close these pensions to staff.
“The government should be supporting workplace pension schemes, not saddling them with extra costs.”
This comes after Dr Ros Altmann, director of the Saga group, pointed out that the current pensions system is no longer fit for purpose.
Dr Altmann also pointed out that the majority of moderate and low earners have now lost faith in the whole pension idea.