Pension warning: Boris urged against changes to your savings

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Pension warning: Boris urged against changes to your savings

BORIS JOHNSON has been urged to scrap any plans to slash rate of pension tax relief or risk “unintended consequences”, the chief of the TaxPayers’ Alliance has warned.

slash rate of pension tax

The Treasury is understood to be considering reducing the rate of tax relief on pension contributions for higher earners, from 40 percent to 20 percent. It is estimated the move could raise £10 billion in the first post-Brexit budget to be announced in the Spring. In the UK almost four million employees pay the higher rate of income tax and benefit from the 40 percent pension tax relief.

Under current rules, those who earn more than £50,000 per year, get back in income tax, 40 pence in every one pound they put towards their pension.

The plans to reduce the rate to 20 percent were first put forward by former Chancellor Sajid Javid, and are being considered by his successor in Number 11 Rishi Sunak.

John O’Connell, chief executive of the TaxPayers’ Alliance, has warned the Treasury against the changes even though it could free-up more public funds.

Mr. O’Connell told Express.co.uk: “The Government should be careful of the unintended consequences of changing pension tax relief.

Mr. Johnson had previously announced plans to increase the income tax threshold from £50,000 to £80,000 during the Conservative leadership contest but has since made a u-turn on the idea.

“It is right that there are incentives to save for retirement.

“Tax-free payments into your private or employer pension also mean less reliance on other taxpayers for retirement income.

“If the Government are to eliminate higher rate pension tax relief, then this should only be done with a substantial increase in the 40 percent income tax threshold as the Prime Minister alluded to during his leadership campaign.”

Sir Steve Webb, a former pensions minister in David Cameron’s coalition Government, also slammed the idea and insisted it could “alienate millions of people”.

Mr. Webb told The Daily Telegraph: “Words like mayhem spring to mind when thinking of the reform.

“You can’t underestimate just how radical this would be.”

“There’s a reason governments haven’t done this before and if they’re going to alienate millions of people then they have to have a really compelling reason.”

“Former Work and Pensions Secretary Iain Duncan Smith has also raised concerns and claimed the move would signal a “tax on aspiration”.

Source Express UK