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Labour calls for review of pension freedoms next year

Labour is calling for a wide-ranging review into the impact of pension freedoms next year with a focus on potential tax avoidance and the impact on annuities. 

In an amendment to the Taxation of Pensions Bill, published yesterday, shadow Treasury financial secretary Cathy Jamieson calls for a “comprehensive” review of the reforms within six months of the bill gaining Royal Assent, expected early next year.

Labour wants to examine the impact of reforms to the public purse, with a particular focus on potential tax avoidance through salary sacrifice.

The reforms create a tax loophole as savers could use pension salary sacrifice to avoid paying employer and employee national insurance, as well as collecting tax relief on their contributions. They will then be able to immediately withdraw the money from their pension pot, subject to marginal rates, without ever having paid NI or income tax.

In addition, Labour wants the Treasury to consider the impact on the purchase of annuities, as well as which income groups benefit most and how behaviour has changed.

The amendment states: ”The Chancellor of the Exchequer shall, within six months of this act receiving Royal Assent, publish and lay before the House of Commons a comprehensive review of the impact of the changes made by this act.”

In a separate amendment Labour also calls on the Treasury to publish its previous research into how the reforms will change behaviour, affect different income groups and the financial risk.

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Comments

There are 15 comments at the moment, we would love to hear your opinion too.

  1. To the Labour Party

    So you think that is going to be a vote winner?

    Good luck with that!

  2. the elephant in the room 13th November 2014 at 3:37 pm

    Good grief Cathy, get real please! This is literally pennies compared to the large scale multi-million government approved corporate tax avoidance going on in the UK.

    Yes its perfectly fine to allow Boots, Starbucks, Vodafone, etc. to pay 1p in the £1m. Let’s focus on those tinkering little pension investors looking for loopholes – oh yeah we’re gonna stop you lot! How dare you try and fiddle a few pennies of your hard earned cash by using a convoluted loophole like this!

  3. Rt Hon Sir Arthur Streeb-Greebling 13th November 2014 at 3:38 pm

    The point about salary sacrifice is that it is the EMPLOYER who gets the ‘tax relief’ and NOT the employee. Another example of socialists trying to play big boys games again. If they can’t ‘get’ something so basic what hope do they have of outwitting the likes of me and my chums?

  4. the elephant in the room 13th November 2014 at 3:45 pm

    Good grief Cathy, get real! This is pennies compared to the multi million government approved corporate tax loopholes that exist in this country.

    So its alright for the like of Boots, Starbuck, Vodafone, etc. to pay 1p in the £1. Its these meddling employees trying to fiddle a few pennies out the system through a pretty convoluted process that needs to be stopped! How dare they try and get back a few pennies of their hard earned income!

  5. Can Cathy also add reviewing the gollowing:
    The impact of the scrapping of commission on GPP schemes (employees who were receiving advice with an AMC under 1% whose employers elect not to pay for full advice)
    The reduction in the Lifetime allowance. How it was introduced by Labour at £1.5 million with a recognition it needed to increase so built in increases to £1.8 million. How the reduction to £1.25 million penalises people who get ‘good’ growth from their pension funds as well as capturing more than the super rich i.e. Doctors, teachers etc.
    Also the impact that politicians have in saying they will review something that has just come in when talking about pensions. This creates confusion, difficulties in planning and which will make some people think that the rules will change so they don’t put money in their pension, or strip out their pension( even though they don’t need it) because they are afraid some politician will change the rules?
    Also how Civil Servants can retire on enhanced pensions and then a short time later go back to the same job?
    Any I’ve missed?

  6. Erm…Rt Hon Sir Arthur Streeb-Greebling…I’m not sure that’s quite correct. What about the Income tax and employee NI that the employee will avoid through a salary sacrifice arrangement?

  7. Typical Labour Party promotion of the nanny state. They don’t want to encourage financial independence because they want to control the hand-outs. They believe they know how to spend your money better than you do. Penalise the thrifty to benefit the profligate.

    With personal freedom comes personal responsibility. 2,000 years ago someone said “You will always have your poor” he might have added “You will also have your irresponsible!”.

    Dick Carne

  8. Some very good comments raised here but taking Peter Herd’s comment further it’s not just the misguided vierw The Labour party may have in believing they may win votes by ‘acting’ in this way…if they cause changes whereby people lose or cause restrictions to the proposed ‘flexible ‘access’ to their pension funds, then they will lose votes

  9. It is easy to forget that during the New Labour years the government picked around and regulated just about every aspect of an individuals life, from how much they were allowed to place in their pension down to how much salt they put on their chips. Whatever you did, there was always someone from the government who knew better.

    It’s good to be reminded of those days a few months prior to a general election. Lest we forget.

  10. I need access to my pension proceeds to pay the Mansion Tax these idiots are trying to impose on me. There again with the wrong Milliband in charge Labour have no hope of getting elected. I have no need to worry anymore.

  11. Why did you not review this when you were in power Labour? I know the answer, because it would not make you look good. I hope you do challenge it openly in the House, so it can be pointed out that you had 15 years to close this so called tax loop hole and did not tackle it.

  12. No doubt we will see a review of EIS/VCT/SEIS/ISA/BPRA and other much more lucrative avoidance mechanisms under a Labour administration? But then again probably not when they are busy looking at this sort of low level issue?

  13. It’s all about the votes… cocked up on this headline, but raising the minimum wage will surely capture a few votes, even if respective employers make redundancies, or go bust because they can no longer afford the wage bill…

    But as always and typical of all parties, they only think what will get them the votes, rather than the long-term good of all concerned!

  14. Where has this issue of ‘tax avoidance’ through salary sacrifice come from? Salary sacrifice has been around for as long as I can remember.

    How someone’s remunerations package is designed falls under employment law so I fail to see what it has to do with politicians.

    Next they will be saying that owner shareholders can’t take dividends instead of salary.

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