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Steve Webb: Pensions as Isas ‘could be Osborne’s Gordon Brown moment’

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Former pensions minister Steve Webb believes Chancellor George Osborne risks “incalculable damage” to savers if he overhauls pension tax relief in the upcoming Budget.

In a speech at the Association of Consulting Actuaries, Royal London director of policy Webb will compare a move to the taxed-exempt-exempt model of pension taxation to Gordon Brown’s raid on occupational schemes.

Webb will say: “The legacy of that damaging change is still being felt today, and the former Chancellor’s [Brown’s] name is forever associated with that measure.

“There is a real danger that with the ‘pensions Isa’ history could repeat itself.”

Webb will use his speech to highlight the likely need to run parallel tax schemes for decades, as well as reducing the incentive to spread pension withdrawals over a longer period if we move from the current tax system.

The former Liberal Democrat minister will also say confidence in long-term savings would be shattered by the dramatic changes.

He will add: “Abolishing tax relief on pension contributions would certainly raise large sums for the Chancellor, even if some of the proceeds were given back as a Government top-up into pension pots.

“But the damage done to pension saving would be incalculable, as pensions are once again seen as a convenient pot for cash-strapped chancellors.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Yes and no. Osborne is the most political chancellor since Brown and irrespective of the pain that it cause HRT and ART savers it will be a calculated move. To be fair as much as the tax credit removal annoyed me, it hasn’t been restored either.

  2. surely even mr Osborne wouldn’t destroy the pension world by choosing pension Isa??

  3. By that does Steve Webb mean it’ll make Osborne Prime Minister?

    Gordon’s tax raid on pensions helped pay for the billions wasted on the NHS and the expansion of the permanent client state. For which he was rewarded with becoming Prime Minister, despite Blair’s best efforts. From the point of view of Brown and the Labour Party it was an outstanding success.

  4. Going the whole hog from a EET system to a TEE system would be a political master stroke from Osborne. It’s not good news for pension savers, but that won’t really figure in the calculation. Billions of extra Treasury income for years to come certainly will. Precious few people understand tax relief on contributions properly or indeed at all outside ‘advised world’. With proper media buy in, headlines such as ‘Osborne makes everybody’s pensions 100% tax free!’ and ‘Britain’s hard working families will now pay no tax on the pensions they strived to build up’ will be what is remembered. Perception is absolutely everything.

  5. Gordon Brown’s changes were regarded as a “stealth tax”.
    If George Osborne removes tax relief from contributions, it would be more like a “ram raid”.

  6. UK pensions lost their mojo years ago. Only ever successfully sold because of tax relief and then entrapped the saver within a high charging poor performing retirement savings account for decades, with only an option to transfer to another similarly charged straight jacket. Sometimes at an appalling cost.

    Great product for the providers, appalling savings vehicle for their customers.

    Retirement ISA’s are just the job.100% tax free at chosen maturity. Accessible if required ,underpinned by a much improved state arrangement.

  7. If people want Pension ISA’S, it would simpler just to increase ISA allowances.

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