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Govt rules out more cuts to pension tax relief

London UK Parliament 480

Chief secretary to the Treasury Danny Alexander has ruled out any more cuts to pension tax relief in this parliament but hinted the Liberal Democrats would go further in their next election manifesto.

In yesterday’s Autumn Statement, chancellor George Osborne cut the annual tax-free allowance from £50,000 to £40,000 and the lifetime allowance from £1.5m to £1.25m.

Speaking during a PoliticsHome Q&A on the Autumn Statement today, Alexander said the Government will not make any further changes.

He said: “We set out the plans as a Government yesterday and it is as far as we have agreed to go. The reduction in the lifetime allowance from £1.5m to £1.25m will affect the top 2 per cent of savers and going down from £50,000 to £40,000 will affect the top 1 per cent.

“The average pension pot in this country is £55,000 so for the vast majority of people this will have no impact at all.”

But Alexander suggested he would like to go further than the current cuts to relief as outlined in the 2010 Liberal Democrat election manifesto, which called for higher rate relief to be scrapped altogether.

He said: “We spend about £33bn for tax relief on pension contributions and 60 per cent goes to higher rate taxpayers so it is fair way to make sure the wealthiest in society make a contribution to the difficult challenges.

“As a Liberal Democrat we may well want to propose going further in our election manifesto, we certainly had suggestions of going further in 2010. But the Government policy was announced yesterday.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Is it all about votes and the majority?

    It’s easy to sell the idea to 95% that they should pay less and the wealthy should pay more.

    But the simple facts are the wealthy do pay more, much more and they continue to be hit. Yet these individuals (not all) generally bring their skills and create jobs, while also taking risks in the process.

    It is only natural for individuals, no matter what there income, will want to retain the lion share and if you look at all the direct and indirect taxes applicable, keeping the lion share no longer exists!

    It is no wonder that some will look to offshore investment, or even a move to foreign shores where they can enjoy more the fruits of their hard labour.

    The problem that then exists is that these A1 business individuals take their skills and their businesses with them, so in the long run the UK losses out!

    Just my simple view and I await with interest the comments that will follow…

  2. Alexander is a plonker, never having had a proper job and totally wrapped up in ideology rather than practicality. Oh, and does he need to be told that his party’s manifesto for the next election will be totally and utterly irrelevant – no-one is going to vote for the Lib Dems nect time around and he might have to go and find a proper job (why any sane person would want to employ him I can’t imagine). Anyway, back to the point – if the government removes the 40% tax break on pension contributions for higher earners then those same people will simply stop contributing. The government may make a little more tax now (albeit the same people can invest into EISs) but the will lose out long term.

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