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Thinktank calls for higher taxes on wealthy pensioners

Reform’s latest paper says favouring pensioners is not a good use of tax revenue.

Thinktank Reform is calling on the Government to end special treatment for pensioners and make them pay hundreds of millions more in national insurance contributions.

In a research paper called, Mind The (Fiscal) Gap: Direct Taxes, Public Debt and Population Ageing, authors Dr Patrick Nolan, Professor Nick Bosanquet and Clare Fraser argue current policies “favour” older taxpayers.

They say an ageing population is changing the way we should think about pensioners in the tax system.

The report’s key proposal is to end to pensioners’ exemption from employee or self-employed National Insurance contributions.

Those earning above the state pension income are eligible for the exemption and Reform says this amounts to just 6.3 per cent of pensioners.

It estimates that ending NI exemptions for pensioners would raise £735m and only affect the richest.

The paper also calls for reform of pensions tax relief after the Treasury and the Association of British Insurers welcomed a debate. Labour is also looking into how it can make changes to the £35bn relief system.

Reform research shows 33.8 per cent of tax relief is spent on 45-55 year olds and just 2.4 per cent on under-25s. It estimates 58.8 per cent of all relief goes to the top 10 per cent and 87 per cent of all relief, or £30.5bn, goes to the top 30 per cent.

Hargreaves Lansdown head of pensions research Tom McPhail says: “Reform is logical but the massive hurdle is the number of voters that such a measure would alienate.”

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