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Pension tax relief in firing line as Hammond mulls ‘intergenerational fairness’ Budget

pension tax
Hammond mulls “tax on age” Budget

Pension tax relief for older wage earners could be slashed as part of a “tax on age” Budget being lined up by Chancellor Philip Hammond.

Sources tell the Telegraph that the Chancellor is mulling ways to promote “intergenerational fairness” in the package to be outlined next month, including cutting national insurance contributions for workers in their 20s and 30s by making savings on pension tax relief.

Hammond is understood to be running ideas passed his own MPs after facing criticism over the so-called “dementia tax” and having to scrap a planned rise in NICs for the self-employed earlier this year.

A source told the Telegraph that Hammond wanted to be “bold” in a plan to “restack the deck for the next generation”.

Another source said: “It is more of a question of rebalancing than just spending money. He is looking at things around regulation – at no cost to the exchequer – or rebalancing.

“There is a recognition of a need to make an offer to appeal to younger voters in some way. That has been falsely focused on students and student finances. It is a much broader thing.”

Planning restrictions on greenfield sites are also set to be relaxed in a house building push, as developers attend a summit on house building in Downing Street tomorrow.

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Perhaps you need to ask yourself when folk can least afford to make pension contributions and work from there. Messing around with tax relief will not change that.

  2. Presumably then as the tax take on pension payments is argued as tax in return for tax allowance made over the term then income tax on pension payments will also cease for the older generations who have found it no less difficult to save.

    • I’m curious as to how that would make things fairer for the young? That would mean those claiming pensions, would have had full tax relief on the way in, then no tax on the way out.

      I.e the best of both worlds..

  3. This won’t be a matter of balancing, for the simple reason that older people contribute much more to their retirement funds than younger people who, because of the demands of buying a home and raising a family, just don’t have as much money available. It has nothing to do with intergenerational fairness.

  4. Yet another tax grab described as fairness.

  5. Trevor Harrington 20th October 2017 at 6:01 pm

    It cannot be argued that higher rates of income tax relief on pension contributions is fair.

    Dear Mr Hammond,
    Please make tax relief on pension contributions a standard 20% and save the Treasury something like 15 Billion £ per year – thank you.

    • It can quite easily be argued to be fair: you get taxed on income when you become entitled to recieve it. By diverting it into a pension scheme, you cease to become entitled to recieve it now and therefore should not be taxed on it now. When you retire, you become entitled to income from you pension scheme and you get taxed on it.

      The rationale for a flat rate of tax relief is affordability (and politics) rather than fairness.

      • Trevor Harrington 23rd October 2017 at 4:57 pm

        Except that the two functions are not linked.

        You earn income and you get taxed at the appropriate rate (some would say).

        What you choose to do with that income, after it has been taxed, is entirely your decision.

        If you choose to pay it into a pension, then the Government currently chooses to encourage you to do so by giving you a 25% uplift (ie a refund of your income tax at the basic 20% rate).

        I see no reason why the Government should encourage some people, but not others, to pay into their own pension schemes, by giving them a 66.6% uplift – obviously, this is an outrageous tax give away.

        Siz – if your argument had any credibility, you could also argue that tax relief on pension contributions should also be given on Capital Gains Tax – obviously ridiculous.

        This Country (Government) is still spending more than it earns (the budget deficit) arguably, inherited to a large extent from the extreme profligate spending by Brown and Blair. The direct and specific result of which, has been the double whammy of increased age and reduced benefits in the state pension.

        I think most people would prefer to see the higher rates of income tax relief on pension contributions being eliminated, and an attempt to get back to a more reasonable state retirement age of perhaps age 65, 64 or eventually even age 60 (like France and most of the other countries in Europe).

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