UK. Pension tax change proposals branded ‘tragic’ and ‘crazy’
On the go: Rumours that the Treasury is planning to raid pensions have been branded “tragic” and “crazy” by speakers at a Hymans Robertson webinar, who warned that any reforms harming incentives to save could undo the work put in to boost retirement standards.
Pensions Expert reported in June on the rumours that Treasury officials have drawn up a list of three reforms to the way pension contributions are taxed, with the aim being to find the money to pay the costs of the coronavirus pandemic and lockdown policies.
The first proposal is reported to be a reduction in the lifetime allowance from just more than £1m to £800,000 or £900,000.
A flat-rate tax proposal has also been made. Currently, higher earners get a tax relief rate of 40 per cent, while lower earners get 20 per cent. The suggestion is that this be changed to around 30 per cent for both.
It is thought this would simplify the tax system, lower the cost of administering all of its many top-ups, and see only higher-rate taxpayers lose out.
The third proposal is for a new tax on employer contributions.
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