TORIES “BRUTAL TAX” ON PENSIONS
The Tories are now planning to impose a 55% tax on almost two million savers, undermining their retirement plans. This comes on top of the decision to scrap the triple lock this year and restrict pension increases to 3.1% - below inflation – a real double whammy!
Pension experts have slammed the tax assault as "drastic", "horrific" and “incomprehensible," as it makes planning for the future impossible. "It's not for the faint hearted,” one said.
Many people understandably assume only the super wealthy will pay, which is not the case at all!
UK Tory Chancellor Rishi Sunak has decided to freeze the pension lifetime allowance for five years. This allowance is the maximum you can build up in personal and workplace pensions over an entire lifetime.
More than 1.6 million people already exceed the lifetime allowance and incur the 55% percent tax charge, and their numbers will now increase.
If your total company and personal pensions exceed the lifetime allowance, HM Revenue & Customs will tax the surplus money at a scarcely believable 55%, making it one of the most punitive tax rates of all.
The lifetime allowance used to be much higher at £1.8 million, but the Tories have repeatedly slashed it over the last decade. It’s now frozen at £1,073,100 until at least the 2025/26 tax year.
A huge problem with the lifetime allowance is that most people have no idea whether they will exceed it, as it doesn’t measure how much you pay in, but the total value of your pension.
Stephen Lowe, director at retirement specialist Just Group, called this “a brutal tax” that will confuse millions. He said:
“These changes make it unworkable to plan ahead. Planning to reduce your liability is almost impossible because a sudden surge in the value of your pension savings if invested in pension funds as so many are, could push you over the brink unexpectedly.
“Trying to navigate this complex pension tax rule is not for the faint-hearted. Quite frankly, it is beyond most people's capabilities.”
Patricia Gibson MP added:
“Constant tinkering with the lifetime allowance will deter people from saving for the future.
"Why should hard working people saving into a pension need to worry about a constantly changing and incomprehensible system? It's so unfair.”
“The Personal Allowance, or amount of income you can earn before paying tax, will also be frozen at £12,570 for four years from 2022.
“The average pensioner income in the UK is currently £17,212 a year. In reality, they’re likely to need more next year because of inflation and rising household bills made worse by the Tories abandoning the triple lock this year, squeezing pensioner incomes.”