Your pension is now HM Treasury’s slush fund so hand it over
Pensions: Government has 'difficult decisions' to make says expert
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When Hunt stands up to deliver his autumn statement on November 17, tens of millions of pension savers will be nervously waiting to hear how much it is going to cost them.
Brace yourself for another pensions smash and grab as the Government scrambles to plug the estimated £50billion hole in the nation’s finances.
Suspending the state pension triple lock for a second year could save £5billion but Hunt is lining up an even more lucrative assault on our workplace and personal pensions.
It now looks certain that the five-year freeze on the pensions lifetime allowance (LTA) will be extended for another two years, until 2028.
The LTA imposes a punitive 55 percent tax charge on savers who build too much pension, making it one of the most punitive levies of all.
In total, more than two million are set to pay it.
And that’s only the start.
Reports suggest that Sunak and Hunt are set to launch a £10billion raid on pension tax relief next week, too.
Ahead of almost every Budget I have reported on over the last two decades, there were rumours that pensions tax relief could be slashed back.
Finally, it looks like it’s going to happen, with Ministers preparing to cut relief for higher earners. It may be slashed from 40 percent or 45 percent to just 20 percent, in line with basic rate tax relief.
Sunak and Hunt could even claim the moral high ground, saying it’s unfair that the better off get more relief.
Pensions tax relief makes a tempting target, as it costs the Exchequer a hefty £42.7billion a year.
Paying a flat rate of 20 percent would save Hunt up to £10billion a year, according to the Pensions and Lifetime Savings Association.
He’ll find it hard to resist a saving of that size.
But it could cost higher earners anything between from £34,500 to £205,700, the PLSA says.
Sunak and Hunt could target our pensions in other ways, say, by limiting the amount of pension contributions we can claim tax relief on each year.
The annual allowance has already been frozen at £40,000 since 2016/17 and can be as low as £4,000 for those affected by the tapered annual allowance or the money purchase annual allowance (MPAA).
It’s hard to believe now, but in the late 1980s and early 1990s, the UK’s pension system was the envy of the world.
The rot began when Labour Chancellor Gordon Brown launched his infamous pensions tax raid in 1997. He scrapped tax relief on pension firms’ dividends in a move that ripped a staggering £118billion from our pensions by 2014.
The total cost today must be more than £200billion.
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That sounded the death knell for the nation’s workplace defined benefit final salary pensions, by making them much more expensive for companies to run.
Once, millions of workers belonged to a “gold-plated” company pension scheme. Few do today.
Brown declared open season on our pensions, and Tory chancellors have been blazing away at them ever since.
Every time HM Treasury finds itself short of readies, Ministers dip their hands into our pension pots.
It makes you wonder why they were encouraging us to save in the first place. Was it for our benefit, or theirs?
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