Chancellor Rachel Reeves ‘plots to slash the 25% tax-free lump sum pensioners can access from their pots when they retire’ leaving millions of OAPs out of pocket in new Budget raid
Rachel Reeves could slash the the tax-free lump sum savers can currently take from their pension by almost two thirds, it emerged last night.
At the moment, most savers can take 25 per cent of their pension pot tax-free once they reach the age of 55, up to a maximum of £268,275.
But Treasury officials are weighing up the impact of reducing this limit to just £100,000.
The Institute for Fiscal Studies has estimated that the move could impact up to one in five retirees.
The £268,275 figure is 25 per cent of the £1.073 million allowance, which used to be the maximum someone could build up in their pension pot without paying extra tax until the previous government scrapped it in April.
Chancellor Rachel Reeves (pictured at Labour conference last month). Treasury officials are weighing up the impact of reducing the tax free lump sum to just £100,000
The Institute for Fiscal Studies has estimated that the move could impact up to one in five retirees (file image)
The move, first reported in the Telegraph, could be seen as a further example of Labour’s war on pensioners.
Steven Cameron, of the pension company Aegon, said: ‘Many individuals will have planned their retirement finances on the assumption they could take 25 per cent of their full fund as a tax-free lump sum. Being stopped from doing so would cause a major outcry.’
Earlier this week the Chancellor relented on plans to reduce the 40 per cent pension tax relief for higher earners amid concerns it would unfairly hit those working for the public sector.
A Government spokesman said: ‘We do not comment on speculation around tax changes outside of fiscal events.’
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Rachel Reeves set to push ahead with plans to borrow money to invest in infrastructure despite the rising cost of government debt
Rachel Reeves will push ahead with plans to borrow money to invest in infrastructure despite the rising cost of government debt.
The Chancellor will change how the Treasury accounts for capital spending in order to reflect the benefits of investment.
Labour has committed to balancing day-to-day expenditure with tax income, and getting debt falling as a share of the economy by the end of this Parliament.
But Ms Reeves is hoping to change the debt measurement to account for the value of the assets the government holds, such as schools and hospitals, the Guardian reported.
The move, which will be confirmed to the Office for Budget Responsibility (OBR) this week, will free up tens of billions of capital spending under the new rules.
Rachel Reeves will push ahead with plans to borrow money to invest in infrastructure despite the rising cost of government debt (pictured at Labour conference)
Labour has committed to balancing day-to-day expenditure with tax income, and getting debt falling as a share of the economy by the end of this Parliament (pictured: The Treasury)
But earlier this week experts warned Ministers about the rising cost of government debt.
Since mid-September, the annual interest rate on a 10-year government bond has risen from 3.75 per cent to 4.2 per cent amid concerns about Reeves’ budget plans.
Mark Dowding, the chief investment officer at RBC BlueBay Asset Management, told the Financial Times on Monday: ‘Rachel Reeves needs to walk a tightrope, otherwise the gilt market will limit her ability to deliver much of Labour’s agenda.’
In a report for the IPPR think tank, Former Treasury minister Lord Jim O’Neill said: ‘This highlights how Labour can implement its fiscal rules in a way that embeds a more long-termist approach.
‘Focusing on a more comprehensive debt metric – such as public sector net worth – would provide greater room for borrowing to invest in line with more credible transparent rules on deficits and debt.
‘It would also bring fiscal rules more in line with how financial markets think about fiscal sustainability.’
Ms Reeves is scrambling to find ways to raise revenue to help fill a claimed £22billion hole in the books and fund Labour’s policy commitments.
