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IFS Slams UK Pension Changes

Wednesday, March 3, 2010

The UK government's plans to restrict income tax relief on pension contributions will create "complexity, unfairness and inefficiencies" in the tax system, according to the Institute of Fiscal Studies (IFS).

Responding to the Treasury's consultation on how best the changes should be implemented, the IFS believes that the government should first have consulted on the policy itself, allowing the industry and tax experts sufficient time to point out serious flaws in the legislation.

Under the new rules, first announced in the 2009 budget, individuals with a gross income (excluding employer pension contributions) above GBP130,000 a year whose gross income plus the estimated value of any employer pension contribution is worth more than GBP150,000 will be affected. Currently these individuals generally enjoy income tax relief on pension contributions at their marginal rate of income tax (from this April, 40% for higher rate income tax payers and 50% for those receiving a gross income above GBP150,000 a year). The new policy means that from April 2011 relief will be tapered down from 50% to 20% (equivalent to the basic rate of income tax) for those whose income, plus the estimated value of any employer pension contribution, exceeds GBP150,000 a year. The 20% rate of relief will apply to those whose income (measured including the estimated value of any employer pension contribution) is equal to GBP180,000 or more a year.

“Implementing this reform will create complexity, unfairness and inefficiencies," said Carl Emmerson, IFS deputy director.

"The government's goal is to raise money by reducing the subsidy that the wealthy enjoy on their pension contributions. But many people on high incomes will still be able to receive unrestricted income tax relief on their pension contributions - for example by making greater use of salary sacrifice arrangements. A better approach would be to reduce the amount that individuals can take tax-free from a private pension from its current level of GBP437,500," Emmerson noted.

The Treasury estimates that the reform will raise GBP3.6bn (USD5.4bn) a year and that 300,000 individuals will be affected. This equates to a GBP12,000 tax rise per affected person per year.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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