Wealthy savers should be stripped of the higher-rate tax relief on pensions, according to Danny Alexander.
The chief secretary to the Treasury has called for tax relief on pensions to be halved from 40% to 20% in a move Mr Alexander claims would save more than £7 billion and make the system fairer. The Liberal Democrat cabinet minister claims that wealthy retirees are benefiting disproportionately from the tax break.
"If you look at the amount of money that we spend on pensions tax relief, which is very significant, the majority of that money goes to paying tax relief at the higher rate," Mr Alexander told the Daily Telegraph.
The new proposals will affect those who earn around £43,000 and therefore pay the 40p higher rate of tax. Currently, for every 60p saved in a pension by a higher-rate taxpayer, the Government contributes 40p in tax relief to make it up to £1. However, should the new proposals be brought in to force, the Government's contribution for the better-off would fall to 20p, in line with the basic rate of income tax.