Posted by Hari on Friday, January 22, 2016 with 2 comments | Labels: Austerity, banks, budget cuts, pensions, taxation
KJ, Chris and Fee come to terms with it all...
SOURCE GUARDIAN: Pension taxes are 'milch cow' for chancellor, says IFS head
George Osborne is using pension taxes as a “milch cow” to pay off the deficit, the head of the Institute for Fiscal Studies has said. The chancellor is expected to announce the results of a Treasury inquiry into tax on pensions in the budget on 16 March. Among the changes being considered is the replacement of variable tax relief on pension contributions with a single, flat-rate of between 25% and 33%, which would cause high earners to lose some of their rebates. Paul Johnson, director of the leading independent thinktank the IFS, said: “The tax regime has been changed and changed again as pension savings have proved something of a milch cow for the current chancellor. “By reducing the amount that can be put in a pension free of tax in any one year and the maximum size of the accumulated pot, he has increased tax revenues by more than £5bn a year.” Johnson said changes to pensions tax relief could cause “the implicit contract at the heart of our pension system [to] buckle under the pressure”. “Governments of all stripes have recognised that widespread access to good private pensions is an essential part of the implicit deal with the voter — we won’t pay you much of a state pension, but we will make sure you have the chance to save for yourself,” wrote Johnson in the Times. “And at the heart of that deal has been the tax treatment of private pensions. It should go without saying that nobody would tie up hundreds of thousands of pounds in a pension, which they can’t access for decades, if there weren’t some benefit for doing so compared to saving in some other way. That benefit is tax relief.” Former Conservative leadership hopeful David Davis told the Times that such a move would deter people from providing a full state pension for themselves. “It’s problematic because the pension industry used to be the jewel in the economic crown when it comes to having a population looking after themselves.”