Chancellor Rachel Reeves could be set to deliver a taxing sting to pensioners by snatching away a key benefit, insiders suggest.
Her treasury team is reportedly contemplating pension tax relief cuts in the upcoming Budget, eyeing methods to fill an alleged £22 billion financial void this year. Currently, when individuals hit 55, they’ve got a chance to grab a quarter of their pension pot tax-free to a hefty £268,275 ceiling, while the rest might get taxed like regular income.
Labour’s being nudged to slash the tax-free cash ceiling for those with sizeable nest eggs. Steven Cameron from Aegon warns the Budget could either trim the tax-free limit significantly or shrink the share to about 20 percent both could fatten up HMRC’s purse, reports the Express.
READ MORE: Mohamed Al Fayed ‘liked young, blonde girls’ at Fulham FC – but coach took steps
Click here for the latest news from the Daily Star.
(Image: (Image: PA Images))
Chatting to The Times, Mr Cameron highlighted that any new rules would need to rake through existing pensions, potentially amassed over many years, to really rake in the extra dough. He noted: “This would be highly controversial, reducing one of the most valued tax incentives that pension savers look forward to.”
For those eyeing an imminent dip into their lump sum, the pensions whiz suggests considering an early withdrawal ahead of Ms Reeves’ Budget speech on October 30. But Mr Cameron also flagged up a big ‘beware’: Pulling funds out too soon could see other juicy tax perks disappearing.
The Institute for Fiscal Studies (IFS) think tank has suggested the Chancellor should slash the pension lump sum to £100,000, claiming it’s tough to defend handouts for the wealthier savers. By chopping the sum, Ms Reeves could bag an extra £2billion a year, the IFS reckons, hitting around one in five old-timers.
But the boffins at the think tank have warned off setting a one-size-fits-all tax relief rate for pension pot fillers, as per City AM. It would be “damaging, complex and inequitable”, the IFS reportedly told the news outlet.
For the latest news stories from Daily Star sign up for our newsletter.