Chappell's coup
Now the CBP of Great George Street must choose their strategy for pen- sions. Attrition, or coup de main? They shave a radical Chancellor, who found plenty of excitement for his first budget, and hoped for a further instalment of reform in his second. As is the way of second budgets, the political background has become more difficult, and the im- mediate needs more urgent. The obvious target for attrition, the salient to nibble at, is the pensioner's right to take a lump sum payment which goes right through the system without the taxman laying a hand on it. But the Chancellor's guarded reas- surance in Parliament suggests that the salient may be evacuated at leisure. What the fund managers fear most is a tax on their investment income. They bring against it the argument which saved mort- gage relief — that too many people had planned their lives on the assumption that the relief was there to stay. By comparison, the coup approach is neat. The staffwork has been done, by merchant banker Philip Chappell, who, with Nigel Vinson, pro- duced the draft which is leading us towards portable pensions. (Mr Vinson's peerage, in the New Year Honours, must encourage his follow reformers.) Mr Chappell's plan for pension taxes suggests that the existing funds should stay as they are, with the same tax treatment and the same rights to members — but be closed to new contribu- tions. Any employer would be welcome to set up a new fund, and, as now, would charge contributions against his tax. But in the employees' hands contributions would be a benefit in kind, and taxed accordingly. Employees' own contributions would no longer be allowed against their own tax bills. The funds themselves would pay tax. But benefits from them would be tax-free, and while the pension rights were accumu- lating the beneficiary could, under suitable circumstances, have the use of the money. The idea would be to put saving for retirement on a par with any other kind of savings. It would also finance the scrapping of all tax rates above the standard rate, which could come down — jam today — to 25p in the pound.
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