Labour's stealth pension tax RAID: Corbyn's plans set to hit retirement savers

The left-wing party led by Jeremy Corbyn has pledged to raise income duty for workers earning more than £80,000 a year, if it wins next month’s national vote.

However, this is set to have big implications on pension saving.

This is because tax relief is based on income tax rates.

Under the current system, people are encouraged to save for retirement with tax relief on contributions – higher rate taxpayers, benefit from higher tax relief.

It means that under Mr Corbyn and shadow chancellor John McDonnell’s current plans, tax relief for higher earners would actually increase.

To combat this, the party may bring down the total amount that anyone over £80,000 a year can save into pensions.

It could also prompt the party to completely reform the system.

It comes after some people have clued for a flat-rate of pension tax relief, which would hit millions of middle income workers earning more than £45,000 a year.

Tom McPhail, head of policy at pension provider Hargreaves Lansdown, said: “Given the ideological leanings of this Labour party, it is hard to see them being relaxed about actually increasing pension tax relief for higher earners.

“This means we’d be likely to see the Annual Allowance Taper Threshold brought down to £80,000, a move which would be met with horror by employers and the pensions industry alike.

“It isn’t clear at the moment whether Labour have thought this aspect through or what they plan to do about it but we should expect a further announcement on this from them.

“This issue also illustrates one of the myriad problems caused by the current pension tax relief system.

“Whoever forms the next government, they have to get a grip on pension taxation and look at a fundamental reform of the system.”

Daily Express :: Personal Finance Feed


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