Mr Osborne had been expected to unveil changes in the Budget on 16 March, but a Treasury source said it was “not the right time” to make changes to pension tax relief.
Under the current system, pension savers receive tax relief at the same rate as their income tax – meaning basic rate taxpayers receive relief at 20% and higher rate taxpayers at 40 or 45%.
The proposal to introduce arrangements similar to an ISA, with no tax relief on contributions but with withdrawals free of tax, would have given a significant short-term boost to the government at the expense of lower tax revenue later.
An alternative option considered by the Treasury was for flat rate relief, which would have benefited basic rate taxpayers and cut reliefs for higher earners.
Therefore the good news is that for the time being there is no change for tax relief on pension contributions.
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