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Explaining to George Osborne how he can solve the nation's financial woes by targeting the billions the Treasury pays out in higher rate tax relief has pushed Michael Johnson into the spotlight. John Greenwood reports
Of all the many reports published in the world of pensions, the two put out by Michael Johnson within the last year have gained considerably more traction than most. Pensions professionals will be wondering how many more of Johnson's ideas the Treasury will take to heart - not least because some of them will have profound ramifications for the pensions industry itself.
The most recent offering from Johnson, who is a research fellow at the Centre for Policy Studies, is called Simplification is the Key, published in June. That paper can lay claim to being the origin of the pound 40,000 annual allowance for tax-advantaged pension saving. The Treasury's adoption of ideas in that paper in the emergency Budget just two weeks after its publication has prompted many to question how much weight ministers are giving to the proposals in Johnson's earlier paper, September 2009's Don't let this crisis go to waste - A simple and affordable way of increasing retirement income.
That paper proposed the replacement of personal accounts with the Flexible Retirement Saving Account, combining features of Isa and pension into a single flexible savings product. Of equal import are the proposals in Johnson's June 2010 paper to reduce tax relief on pensions in return for a higher State pension.
Central to Johnson's thesis is the idea that the cost of tax relief on registered pension schemes is so great - his paper identifies a net cost to the Treasury in 2008/09 of pound 27.1bn - that if the objective is to reduce poverty in retirement, then tax relief could be put to far greater use elsewhere.
Johnson sees himself as an outsider in relation to the pensions industry, having trained with JP Morgan in New York and only joining Tillinghast, the actuarial consultants, after 21 years in investment banking. The former secretary to the Conservative Party's Economic Competitiveness Policy Group has taken a dispassionate look at UK pensions, and higher rate tax relief has ended up squarely in his sights.
So, following the success of getting...