Labour ‘plotting to raid pensions’ in repeat of 1997 betrayal

Labour was yesterday accused of plotting to raid pensions by overhauling tax relief on retirement funds.

Chancellor Jeremy Hunt said the party would betray retirees as he warned of a repeat of 1997 when Gordon Brown targeted pensions.

The Conservatives highlighted that Shadow Chancellor Rachel Reeves has repeatedly said pensions tax relief should be restricted for the wealthiest.

While Labour has explicitly ruled out increasing taxes such as VAT, the party has said only that raiding pensions ‘is not Labour policy and will not feature in our manifesto’.

The Tories say this leaves the door open to the party introducing the tax at another stage, for instance in an emergency budget. Mr Hunt told The Sunday Telegraph that voters will ‘never forget’ Mr Brown’s £118 billion raid on pension funds.

The Conservatives highlighted that Shadow Chancellor Rachel Reeves (pictured) has repeatedly said pensions tax relief should be restricted for the wealthiest

Chancellor Jeremy Hunt (pictured) said the party would betray retirees as he warned of a repeat of 1997 when Gordon Brown targeted pensions

‘Labour betrayed pensioners before,’ he said. ‘We will never allow it to happen again. We are worried that, just as Labour did in the past when they have a black hole in their finances, they will go for back-door taxes on pensions.’

He made the comments as he vowed to protect retirement funds with a ‘pensions tax guarantee’ to prevent levies being raised or new ones introduced.

Mr Hunt also said he would keep the right to draw down 25 per cent as a tax-free lump sum and ensure tax relief stays at the marginal rate.

At present, all workers enjoy tax relief on pensions contributions at the same percentage rate, regardless of whether they are a basic or higher-rate taxpayer. The Tories highlighted 12 times when Ms Reeves appeared to speak in favour of changing tax relief on pensions contributions for the highest earners.

In one example from 2018, in a speech to the New Economics Foundation, she said: ‘Forty per cent of UK wealth is in private pension funds. 

‘We could restrict higher-rate pensions contribution relief.’

She made similar comments in the same year in The Everyday Economy, saying of the 40 per cent figure: ‘To combat this inequality, higher rate pensions contribution reliefs could be restricted.’ And in The Independent in 2016, she said: ‘Let’s replace the £34 billion pensions tax relief system with a simple savings bonus.’

Chancellor Jeremy Hunt said the party would betray retirees as he warned of a repeat of 1997 when Gordon Brown targeted pensions, with Ms Reeves dismissing it as a ‘desperate gimmick’. Experts have also noted that the party has made several commitments that it is yet to set out funding for.

Paul Johnson, director of the influential Institute for Fiscal Studies, tweeted: ‘Some punchy “promises” from Labour. Last week promised to end NHS waiting lists over 18 weeks. Yesterday said they’d get the employment rate to 80 per cent. The former was achieved only via huge spending increases in the 2000s. We have never got close to the latter. Time will tell.’

At present, all workers enjoy tax relief on pensions contributions at the same percentage rate, regardless of whether they are a basic or higher-rate taxpayer (Stock Image)

The Tories highlighted 12 times when Ms Reeves appeared to speak in favour of changing tax relief on pensions contributions for the highest earners (Stock Image)

Mr Brown scrapped tax relief on dividends paid into pension funds in his first Budget in 1997 at a time when many funds were in surplus. His policy – sprung on the public weeks after the election landslide – was blamed for killing off private-sector defined benefit pension schemes. The Tories are now warning that Labour could be planning a similar ruse, after Sir Tony Blair and Mr Brown kept the plans under wraps during the campaign.

Mr Hunt claimed that a Labour government would ‘try to increase taxes wherever they think it won’t be noticed’.

Jonathan Gullis, deputy chairman of the Conservative Party, said: ‘When they run out of money, as every Labour government does, you can be sure they’ll have their hand in your pockets and in your pensions.’