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Experts question ‘very optimistic’ Labour figures on pension tax relief cuts

Pension experts have slammed Labour’s “very optimistic” plans to raise up to £1.3bn a year by cutting top rate pensions tax relief.

Labour is proposing to slash relief for those earning more than £150,000 from 45p to 20p to partly fund a compulsory jobs guarantee for the under-25s.

It estimates the cuts will raise between £900m and £1.3bn every tax year alongside a £2bn annual tax on bankers’ bonuses.

Annual pensions tax relief allowance is being cut from £50,000 to £40,000 next month while the lifetime allowance will drop from £1.5m to £1.25m.

Legal & General pensions strategy director Adrian Boulding says: “There is an element of double counting. The coalition plans to reduce the lifetime allowance to £1.25m so a large proportion earning north of £150,000 are caught.

“They will stop paying pension contributions before the next election so the savings have been booked. I’m dubious about the Labour figures.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “There are a lot of variables but the proposal looks very optimistic. Even if they pursue this misguided policy, will it produce the revenue they want? Probably not.”

Association of Chartered Certified Accountants head of taxation Chas Roy-Chaudury says: “In 2009, Labour was trying to save £3.5bn from the same policy but the coalition has done it other ways. I’m not sure how much is left.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Dear Mr Balls – no need to convince us – we know you are innumerate.

    You are also too young to have experienced the Wilson years. Basically Harold Wilson had a similar ethos to you and the result was what was termed the Brain Drain. His idea to combat this was with ‘I’m backing Britain’ and the ‘White Heat of Technology’. Neither prevented that government going cap in hand to the IMF for a sub.

    You helped to bugger our economy when you were last in power, presumably you want a second chance to finally do a complete job.

  2. Labour propose something, and experts who have never been particularly supportive of Labour in the past criticise those proposals.

    And Harry, I think the worldwide crash had more to do with buggering our economy than anything Ed Balls did. I don’t think you can blame him for Lehman Brothers, Greece, Ireland, Spain, Italy, Portugal….

    ‘Brain drain’ was always rather exaggerated (would that some of our bankers had ‘drained’ in 2006/07…!!) and White Heat actually predated the 1964 election, so I’m not sure you can conflate the two.

    And are you really saying we should keep higher rate tax relief? Seems like a Government hand-out to me – and I thought we were all supposed to be against those now. If higher rate tax payers need an incentive to save, then surely ‘you’ll be poor in retirement if you don’t’ should be incentive enough.

  3. @Smithy0364

    Giving economics and history lessons to a committed socialist is always a nil sum game. But nevertheless:

    These high earners will never be poor in retirement. They will just use ISAs, VCTs, insurance bonds, (onshore and offshore) and all manner of other tax efficient vehicles if they choose to stay in the country. No doubt a Socialist government will close these down one by one.

    The idea that saving and investment actually helps the economy is something that escapes those who prefer the politics of envy. That those with the means are the highest savers and that the highest-earning 1 per cent of Britons pay 38 per cent of all income taxes, according to research. Indeed the top 10% pay 39% of all tax. So how does squeezing the rich help the economy? By encouraging them to have a good income in retirement recoups much of the tax they have enjoyed – or don’t you in common with Mr Balls realise that tax relief on pensions is only borrowed money? We pay it back when we receive the income. I know a politician only thinks as far forward as tea time – but I expect better from a financial adviser.

    My time has passed, but I really don’t know why anyone under 40 who has any talent chooses to stay in this country if the sort of views you put forward gain any traction. Indeed when I get to retirement I would seriously contemplate leaving and taking whatever assets I possess, if these socialist ideas ever come to fruition.

    Oh and when it comes to messing the economy – it is Labour who are the experts. It took Maggie to sort out the mess left by Wilson and Callaghan. Unfortunately we have a limp wristed coalition that is trying to rectify the mess made by Blair, Balls and Brown – yes there were other problems, but we are still in a much worse place than Germany, Sweden, Belgium, and Luxembourg. Our deficit is rising, our balance of payments is getting worse, and we are the most personally indebted nation in the world. How like a left winger to want to compare with the worst, rather than the best.

    (For the avoidance of doubt I’m not a Tory, Lib Dem, UKIP or anything else)

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