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Leave our pensions alone, says Standard Life chief

David Nish, chief executive of Standard Life (SL.L), urges the chancellor not to hit higher rate tax payers saving into a pension in next week's Budget.

 
Leave our pensions alone, says Standard Life chief

David Nish, chief executive of Standard Life (SL.L), has urged the chancellor not to scrap higher rate tax relief on pensions in the Budget next week.

The Treasury spends £7 billion a year on pensions tax relief for higher rate tax payers. Speculation has grown that George Osborne will target this as he attempts to balance the country’s books and reduce the deficit.

Nish said this would be a mistake as it would further damage the public’s confidence in pensions, which have been subjected to successive tinkering by successive governments. In 2010/11 the amount saved in to ISAs (individual savings accounts) overtook pension contributions for the first time. The comparative simplicity of ISAs is often cited as a reason for this. 

‘What worries me is the greater uncertainty it causes consumers. We’ve got to get back to a savings culture in the long term,’ said Nish. ‘We’ve had too much change [to pensions] and change that appears to identify individual savers would be really unfortunate.’

Nish denied he was speaking from commercial self-interest. Although Standard Life is one of the biggest pension providers in the country, it sells a broad range of savings products and Nish claimed the issue of higher rate tax relief was not ‘core to us’.

The damage would come, he said, from discouraging people from saving into a pension which, he hinted, would undermine Osborne’s wish for pension funds to invest in long-term infrastructure projects. Arguing that there should be no further changes to pension rules, he said: ‘That would do the country a lot of good as that would provide capital for investment in the future.’

Nish was speaking after Standard Life declared its 2011 results. These beat forecasts with operating profits before tax jumping 28% to £544 million.

Ironically, given Nish’s comments on pension changes, the results were flattered by a £64 million accounting gain caused by the company switching its staff pension scheme from a link to RPI (retail price index) inflation to the cheaper CPI (consumer prices index) measure. Similar switches elsewhere in the private and public sectors have angered unions who argue the change in index linking weakens a key benefit for workers.

However, cost-cutting and an 8% rise in fee-based revenues to £1.2 billion also contributed to the profits surge.

Nish said it was 'great' to be in 2012 as Standard Life was well positioned to benefit from two big changes coming this year: the auto-enrolment of workers into company pension schemes, and the abolition of commission to financial advisers at the end of the year. 

With a better-than-expected final dividend of 9.2p the share price rose 1.5p to just over 238p. This brings total dividends paid to shareholders to 13.8p, an increase of 6.2%. The share price has risen 25% in the past six months.

12 comments so far. Why not have your say?

Steven McCann

Mar 13, 2012 at 18:27

Can't believe the arrogance of higher rate taxpayers like Nish. If previous Chancellors (or employers) can plunder the pension funds of the "ordinary tax-payers" and expect us to retire on a paltry pittance then the same has to happen to those who can make up the shortfall quicker.

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RL

Mar 13, 2012 at 18:43

This is special pleading on a magnificent scale.

These guys create complex structures and charge huge fees to manage these pensions which rely on a tax break for their effectiveness. You have to ask who gets the benefit of that break, the Pension Funds industry or the Pensioner. Well in fact you know the answer!

For most people an ISA is a much better and more flexible vehicle. For the rest why should the taxpayers fund their pensions?

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Reader via mobile

Mar 13, 2012 at 19:32

Higher rate tax earners already contribute more than their fair share to tax revenues, how about taking it off the final salary recipients who live off our backs in the public sector schemes.why can we not afford higher rate tax relief yet can afford civil device pensions?

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Roydo

Mar 13, 2012 at 19:36

@RL

Erm, the taxpayer does not "fund" their pensions, they do, and their employers do, in the main. In your argument, your ISAS are "funded" by the taxpayer!

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Anonymous 1 needed this 'off the record'

Mar 13, 2012 at 21:33

The Government does not feel the country needs wealthy gifted people, not surprising as the UK slides downwards towards been a truly 3rd world country. If you not on minimum wage/benefits you not one of us.

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Michael Stevens

Mar 14, 2012 at 10:12

Pensions should be simple. No 50% tax relief and no carry forward. Use it or loose it.

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misss sold

Mar 14, 2012 at 21:17

Interesting mix of comments, how about putting back the tax relief on the share dividends that brown quietly stole, so pensions can grow better overall?

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dd

Mar 14, 2012 at 21:39

Jon

Mar 18, 2012 at 09:50

Those who decry tax relief on pension contributions at any level overlook the fact that employer contributions are made 100% tax free, and also free of employer's NI. Therefore, taking the whole of the direct employment costs, people in expensive DB schemes receive higher tax relief than anyone else.

Why is it that so many contributors do not understand simple facts like this? Or will they be happy for huge tax bills to be sent to middle and higher income public employees ? Why should people avoid tax (NI) in this way then?

Saving for a pension is simply deferring income, and tax will be paid on most of this in the future. We should encourage peope to save for their retirement, and stop favouring DB schemes whilst hitting those who have less lucrative employment terms.

And it is ironic that attitudes to long term saving are controlled by how often the Earth goes round the Sun. We should somehow be looking at lifetime taxation as far as lifetime saving goes.

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banjofred

Mar 18, 2012 at 10:29

All public sector pensions should be immediately switched to money purchase schemes. There is no reason for us to fund the public sector people when we have been screwed. You can run a country based on taking money away from the real earners and giving it to the wasters and public service "maKEMEAJOB"

civil servants.

They are chopping quite a few over time, but its still the biggest single element our our tax.

Saving for a pension in the real world outside the public sector is a waste of time. Gradually people will realise this, although some mugs in the current generation wil lnot get the message until its too late. People ignore history but its all there - governments let you save up then thieve it all off you.

Pensions are a mugs game

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dd

Mar 18, 2012 at 12:59

Those who are able to save a pot big enough to fund their retirement at a reasonable level are regarded as super wealthy, to be targeted for more tax, whereas

those without such a pot but with the same retirement income from a db scheme are regarded as hard done by and must continue to be protected.

It is blatantly wrong.

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Bob saxton

Mar 18, 2012 at 14:01

Pensions are not a mugs game for CEO s of big companies. I find it infuriating that ordinary people who are finding it hard to get a job, fed , or keep warm pay through their taxes, the money saved on their services, VAT, fuel tax and the VAT on the fuel tax, are having to fund this huge loop hole to boost the pensions of people who wil never want and who will be able to afford an education for their children that will guarantee that the next generation will be able to get jobs like CEO or Prime Minister or Chancellor of the Exchequer. This is essential to perpetuate this iniquitous system.

Bob the electrician

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