Dr. Barra Roantree:

It comes back to what previous members of the commission have said; in thinking about the pension system, it is important to take that lifetime perspective and if one wanted to restrict the generosity of the system to those who are better off, it is perhaps better to think about that as over the entire lifetime. From that point of view, a lower annual limit penalises people who may have a lot of income at a certain point in time. An extreme example is footballers or professional sports stars. We make allowances in other places in the tax system for sports stars or even in agriculture, to allow for some income smoothing. The direction of the commission was that you could decide you want to make the system more or less generous, but that is better done by examining things like the standard fund threshold, the lifetime limit of what you can save in a pension, tax-free. We homed in on the tax-free lump sum; there is a lot of discussion about marginal rate relief and changes to that, but the system is most generous - without a very good policy rationale or basis - in the tax-free lump sum. What we want from a pension system is for people to save for retirement and have a stream into retirement, but the tax-free lump sum does not really do that. It encourages people to take it in one big sum. It is particularly generous to certain forms of pensions - those on direct benefit pensions get a multiple of their salary. Regarding the Deputy's point, it is important to think about the regressivity or progressivity of the system, taken over a lifetime, rather than focusing on annual.