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Savers warmed of state 'tax raid' on pensions

George Osborne announced in the summer budget that the government will make cuts of £37bn during this parliament

3 November 2015

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The CEO and founder of one the largest international financial consultancy groups, the deVere Group, has warned of an impending 'tax raid' on pension tax relief for high earners.

'Let's be clear: this is a tax raid - and the time to act is now for those who could be affected', Nigel Green has said.

'George Osborne has already signalled plans to change existing pension tax breaks in the next budget. The annual allowance will be slashed from £40,000 to £10,000 for many higher earners and there will be hefty tax charges for anyone who goes over the threshold.

'However, he might bring these plans forward to help plug a hole in the budget. As such, those on higher incomes should review their strategy sooner rather than later to help mitigate being stung, and to make the most of their retirement savings.

The outcomes of the government's spending review are due to be announced on 25 November. George Osborne announced in the summer budget that the Tories expect to make cuts of £37bn during this parliament.

Green feels that targeting pension tax relief will be counterintuitive, discouraging people from saving at a time when there is decreasing generosity from the state as well as private pension schemes.

'The slashing of pension tax breaks is yet another depressingly familiar hammer blow for those wanting to get ahead in life through hard work and prudently saving for their future.

'It penalises saving when it has never been more important to do so and as it increasingly becomes a personal responsibility. We're all living longer, meaning savings need to last longer, debt levels are high, care and health costs are climbing, and there's a considerable reduction in the generosity of both state and private pensions.

'Given these factors, and the consequences for the country and for families of an increasingly older population with few financial resources, it seems madness to discourage savings in any way. Indeed, we need to do everything we can to revitalise a strong, long-term savings culture.'

Auto enrolment

Meanwhile Sean McSweeney, an auto enrolment specialist at Chase de Vere, believes that the rapidly increasing number of compliance notices for auto enrolment will penalise many small employers.

McSweeny explained that The Pensions Regulator has already issued over 100 fixed penalty notices, as well as two escalating penalty notices, which carry a fine of £50 per day.

'These relate mostly to employers with more than 50 employees and we expect the numbers to increase considerably in the months ahead as smaller employers reach their staging dates. There are many small employers currently sleepwalking into trouble' he warned.

 

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Pensions