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Budget: Treasury plans ‘radical’ pensions tax overhaul

George-Osborne-in-Television-Studio-700.jpg

The foundations of pensions tax system could be swept away under “radical” proposals announced by George Osborne in today’s Budget.

The Chancellor announced a green paper that will look at moving the taxation of pensions closer to the Isa regime, where tax is paid on contributions, not on withdrawals.

He said: “It’s time to look at the other end of the age scale, to those starting to save for a pension. The truth is Britain isn’t saving enough and that’s something we need to fix in the economy too.

He added: “I am open to further radical change – pensions could be treated like Isas. You pay in from taxed income and its tax free when you take it out and in between it receives a top up from the Government.

“This idea and others like it need careful and public consideration before we take any steps – I am from today launching a green paper that asks questions, invites views and takes care not to prejudge the answer.

“Our goal is clear. We want to move from a economy built from debt to an economy built ont he more secure and productive foundations of saving and long-term investment.”

The Government had already confirmed the annual allowance for pension contributions will be tapered for those earning over £150,000 to fund raising the inheritance tax threshold.

From April 2017 the individual IHT threshold will be raised from £325,000 to £500,000 when property is included, giving a married couple a shared £1m threshold.

Reduced allowances will be offered for properties worth more than £2m, with those worth upwards of £2.35m seeing no change.

The move is funded by a tapering of tax relief on pensions contributions for those earning more than £150,000, with those earning £210,000 able to contribute just £10,000 to their pension on a tax-free basis.

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. James Hurdman 8th July 2015 at 1:34 pm

    There’s a surprise – a Government that wants to tinker with pensions. After all, it’s not like they’ve been changed recently is it?

  2. All smoke and mirrors designed to balance the books in the short term and to hell with the long term.

  3. Well, this s a surprise – not.

    Given the reduction in reliefs and the imposition of allowances, the grab of future income tax through “freedom” it now wants to dump the relief and extend the ISA allowance – much much better for high rate taxpayers than the current system which was starting to look a bit better for lower rate taxpayers in comparison.

  4. “We want to move from a economy built from debt to an economy built ont he more secure and productive foundations of saving and long-term investment.”

    You venal so and so. What you mean is yet again – I want to grab the tax now and to hell with what happens when I’m no longer Chancellor. If that statement has any veracity why are you allowing people to ‘trash the cash’. You reduce the benefits – so what will these people live on in later life. There are only so many vacancies to sell the Big Issue.

    Of course perhaps you might also discourage people spending what the don’t have. Limit the debt on credit cards – that would be a good start. Make a rule that a minimum of 50% has to be paid off the monthly bill.

  5. a government that steals from private businesses to pay benefits to others, is not a government for growth.

  6. also lets see a massive reduction in buy to lets and another property bubble bursts , just look at the average LTV ????

  7. Very different view here- but about time!! this is ridiculously complex system, it is individuals money and there are lots of life events that need funding- what we need to is good, non-capped tax-efficient investment vehicle that we can save into and take out as we need, that will help retirement needs and other life event needs. Roll on review. I want words like ‘Lifetime Allowances’ to be something in my distant memory please……

  8. Let’s start with abolishing the MPs Pension Scheme and replacing it with a Money Purchase alternative that is within the Allowances and Limits everyone else is restricted by. That way, George and colleagues will really be in the same boat as everyone else.

    Then, let’s address the real cost of all those Final Salary Schemes promised by the public purse and paid for by everyone outside the public sector, as well as within. Find a way of reasonable adding on the annual cost of their benefits to their overall remuneration so that the people can see just how much they are really getting paid by turning up at work.

    Then, if there’s a solvency issue in the scheme, add that into the equation and some very interesting numbers will emerge.

  9. He added: “I am open to further radical change – pensions could be treated like Isas. You pay in from taxed income and its tax free when you take it out and in between it receives a top up from the Government.”

    .. and in between it receives a top up from the government. So tax relief by another name?? Otherwise is is just an ISA

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