Planned tax raid on private pensions by the government

[Oldbean1965]

I have read a few articles about how the government plans to raid private pensions in their budgets in order to raise money. Of course it could all be stirring by the media.
How could they get their hands on our private pension money? We'll pay tax on it when we start receiving it anyway, which galls me as it's our savings. Why should you pay tax on money you've already been taxed on throughout your working life and saved?
I hate this government already, but the previous government were a shit show too 😡

Without checking, I think their share of the vote was around a third, only slightly more than it was at the previous GE 4 years ago. Labour didn't "win" the election, the Tories "lost" it, mostly due to the odious little cretin Sunak!

But anyway, when it comes to tax, most people agree that taxes need to increase, but most people want it to be the mythical "someone else" who should pay it, never themselves.

We even have people who say that different occupations/professions should have different tax rules!

They won’t do it. They need people to save for pensions. Also, pensions are one of the biggest forms of investment in the country, they literally cannot afford for people not to invest in pensions. It will ironically hit a high proportion of higher paid public sector workers who they are desperate not to piss off. They can’t afford to then have private higher tax payers not investing.

Thank you for putting me straight on the fact that you don't pay tax on it until you withdraw it. As dh has turned 60 & I'm looking to reduce my hours I think we'll both withdraw 25% of our pensions before the autumn budget in case they do remove that option. I wouldn't put it past them.

That's exactly what I'd like to see stopped.

I think it’s unlikely they’d wipe out in one go. In general I think big changes like this are more forward looking and allow people to plan. I think they are more likely to do things like reinstating the lifetime allowance or reducing the annual contribution limit. They could remove high rate tax relief on pension contributions (ie. You only get tax relief at the basic rate so it’s ‘half’ a tax break for high rate tax payers but not full relief) that would raise a fair bit of money but be very controversial, especially since so many people have been dragged into the higher bands by inflation and threshold freezes.

But that will simply lead people to work less as a result by reducing hours and going part time in order to keep those things - particularly the £100K cliff edge as otherwise you'd be working 'for nothing' as the personal allowance and childcare loss strips any earnings between around £100 up to about £120K.

So, in effect, the public purse will lose all taxation on that amount. Whereas the current system is also crap as people squirrel money into pension to reduce the taxable income, at least the public purse will likely get something back when its taxed upon withdrawal in elderly years. Disincentivising people to work and actively providing incentives to reduce hours means no taxation on that amount at all.

It won’t be.

But when you friend withdraws money from the SIPP, they will pay tax on 75% of the withdrawal as if it is income.

For example, they withdraw £1 million (kerching!) and pay £306,692 in income tax (30.6%).

Just how much tax does the government want?

I doubt there are more than a handful of people in the UK that are in your friend's situation, so any attempts to tax the pot will raise very little.

Not to mention the state relies heavily on pension investment to support the economy. More so going forwards when they want to bring in UK investment percentages. Our economy would collapse if people were put off from investing in pension funds. It’s why the flat rate tax relief wasn’t done before.

Healthcare professionals trained here are in great demand globally. Particularly in countries which pay far more generously. It’s pointless spending millions on training them, only to lose them abroad when we can take quite simple measures to encourage them to stay. I don’t give a shit if Big4 staff move abroad, I care very much if the doctor in whose training my money has been invested does.

There's also a shortage of cyber security specialists. Without them the NHS would completely collapse. Should they also get an exemption?

People believed Labour were going to "tax the rich".

Imagine what's going to happen when they discover "the rich" is basically a euphemism for anyone that works.

Good times for a taxguru though.

I wouldn't waste your time trying to educate the 'tax the rich' zealots. They're completely clueless and think everybody is jumping out of bed each day eager to pay taxes without a thought for their personal circumstances and quality of life.

"Imagine what's going to happen when they discover "the rich" is basically a euphemism for anyone that works."

So long as "the rich" is a Labour euphemism for anybody that works in the private sector, I doubt they'll care until the economy collapses and Labour spend another 15+ years in opposition.

Yeah they will, Labour always stick their hands in people's pension pots. It would be far more of a surprise if they didn't help themselves to the nest egg people have been saving for 30 years, to try and fund a marginally comfortable retirement.

Trouble is that Labour don't have a good track record on thinking things through and considering the "unforeseen consequences" (that most normal people would easily foresee).

Just look at Gordon Brown reducing tax for limited companies and then acting all surprised when hundreds of thousands of sole traders converted their window cleaning, handyman, dog walking and other "low profit" busineses into limited companies. They claimed it was "unforeseen"!!! Even their paymaster general, Dawn Primarolo, spoke in Parliament saying they didn't think sole traders would convert to limited companies "just to save tax". Utterly bonkers.

Got to hope Kier, Raynor and Rachel have thought things through properly this time if they're going to make any big changes. But signs aren't good - they've already "tweaked" the WFA rules so older pensioners still get it this Winter after seeing the backlash!

They will do it. It's just "can kicking" down the road. We need people today to save for their retirement in 20/30/40 years' time. As with any government, they're just looking to the next 4/5 years, so a pension tax grab would bring in tax revenue now at the cost to the country of dealing with the resultant pension tax time bomb in a decade or two away when all the current politicians will have resigned/voted out and sitting pretty on their gold plated pensions, not giving a toss about the mess they left behind.

Nah - I think they will. I think that’s why it’s gone quite on flat rate relief and other ideas are coming in. They have been told by many economic think tanks and companies about the huge risk of people don’t invest. They can’t afford for workers to stop paying into pensions.

I do agree with you though.

Gordon Brown introduced 10% tax on dividends in pensions some time ago.

Ironic that foreign investors in the UK pay no tax on dividends but British pensioners do. It would absolutely kill investment in the UK if foreign investors did pay tax on dividends so lots of good reasons not to do that so Brown decided to hammer pension savings as an easy target instead.

PFI kicked the can down the road, and looked good at the time. I agree with you generally

Starmer has said before he regards anyone who saves money or has any form of savings as not working class and that the Labour party is for the working class. They have been clear if you save money they are coming for you.

How about if you can't pay the doctor because you have stuffed the working middle class and they have left?

I don't think that's true. The 10% withholding tax is paid at source before the dividends are paid to shareholders.

Non-UK residents are obviously not subjected to UK income taxes on the remaining 90%, but would presumably be taxed in their home country.

Same with student loans.

Some form of pension grab. I think either the IHT loophole or tax on withdrawal. They won’t change the tax relief on contributions. They can’t afford for people not to plough into investment funds. That’s why the flat rate idea is going quiet all of a sudden.