Brown to limit pension funds to £1.4m

The Chancellor received the green light to introduce a £1.4m lifetime limit on pension savings yesterday, after the National Audit Office confirmed that few people would be hit by the "fat-cat" tax.

The Chancellor received the green light to introduce a £1.4m lifetime limit on pension savings yesterday, after the National Audit Office confirmed that few people would be hit by the "fat-cat" tax.

Plans to slap a hefty tax take on any savings people have above £1.4m at the time of retirement were met with fury from the business community when they were mooted last year. Gordon Brown insisted that only 5,000 people would be caught by the limit, and only 1,000 additional people every year, but some external estimates suggested up to 600,000 people would be taxed heavily and companies have lobbied for the £1.4m limit to be raised. In view of this, Mr Brown asked the NAO to verify the Government numbers.

The NAO concluded yesterday that £1.4m was the right level for the limit. It does, however, put the number of people affected by it at nearer 10,000 and warned the Government there was "thin" evidence to suggest that only 1,000 people every year would have funds exceeding £1.4m.

Despite this, the NAO said the Government's figures were "within a range of reasonable estimates" and it is expected the Chancellor will press ahead with legislation in next week's Budget.

Pensions experts continued their fight against the lifetime limit yesterday, saying it will not just catch top executives.

Workers on salaries of £55,700 will find that they too have funds reaching £1.4m, according to Mellon Human Resources. "A lifetime allowance will have a devastating effect on middle management," Kevin Le Grand of Mellon said.