Pensions tax break for civil servants

SENIOR civil servants could escape Gordon Brown's cap on pensions under plans being drawn up by Ministers. The proposals would allow them to avoid punitive tax rates on savings above the £1.5m limit imposed by the Chancellor.

The cap caused an outcry when it was announced, with business leaders claiming it would drive high-earners out of pension schemes. That anger will be increased by the news that Ministers are offering up to 1,000 Whitehall mandarins the chance to get around the cap.

Brown's 'lifetime allowance' - to be introduced in April 2006 - sets a £1.5m limit on the amount of money people can build up in their tax-free pension pot. Any savings above the limit are subject to tax of 55%.

But the Cabinet Office has drawn up proposals which would allow the best-paid civil servants to reduce their pension contributions in order to stay below the limit. Any pension they forgo will be paid as extra salary.

A Cabinet Office spokesman defended the proposals and stressed such an option was available to private sector employers. 'We want to provide the best service for our members, just as any private scheme would,' he said.