Labour leader Ed Miliband has laid out plans to cut pension tax reliefs in order to fund a £3,000 reduction in university tuition fees.
In a speech today, Miliband promised to cut tuition fees from £9,000 to £6,000, with funding coming from a reduction in both the ceilings for tax-free annual and lifetime savings in pensions.
The allowance for lifetime tax-free pensions savings will fall from £1.25m to £1m under the plans, while the annual allowance will fall from £40,000 to £30,000.
In addition, people earning over £150,000 will get the same rate of tax relief on their pension contributions as basic rate taxpayers, while graduates earning over £42,000 will also pay a higher rate of interest on their tuition fees.
Miliband said: “Those with incomes over £150,000 currently get pensions tax relief at more than twice the rate of basic rate taxpayers.
“So Labour today confirms our previously announced policy that people with incomes over £150,000 will get tax relief at 20 per cent: the same rate as basic rate taxpayers.
“And we will continue this government’s policy of reducing the annual allowance and lifetime limit that caps the amount people can put into their pensions tax free.
“We will reduce the lifetime allowance for tax-free savings to £1m: still 25 times higher than the average defined contribution pension.
“And we will reduce the annual allowance for what you can save tax free in your pension to £30,000: still nearly ten times higher than the average pension contribution.”
Wingate Financial Planning director Alistair Cunningham says the plans are “terrible”.
He says: “We have had far too many changes to pensions already and it hits people who aren’t lucky enough to be in final salary pensions a lot harder than those who are. Pensions just need to be left alone.”