Sunak planning stealth tax on pensions which could leave millions of savers worse off
Rishi Sunak and Jeremy Hunt are reportedly planning a stealth tax on pensions in an attempt to balance the books and revive Britain’s economy.
The prime minister and chancellor are exploring tax rises and budget cuts to counteract the damages done to the UK economy and reverse Britain’s damaged credibility following Liz Truss’s failed mini-budget.
The stealth tax rises would introduce tax rate increase without actually publicly announcing them, meaning millions could be paying more without noticing.
In addition to this, The Daily Telegraph has suggested a freeze in the pension lifetime allowance is set to be revealed later this month. This would also leave approximately two million more savers paying more under a delay in the rise in the tax threshold for retirement funds. The pension lifetime allowance is currently set at £1,073,100 until 2025. The new plan would extend this freeze until 2027.
However, the planned tax rises could risk further alienation and increased political instability with unpopular cuts also planned in time for the chancellor’s fiscal statement on the 17th of November. Tax threshold freezes affecting income tax and national insurance are also reportedly already set to be released.
Sunak stated the country must face “trade-offs” in the upcoming autumn statement as he explained in The Times:
“Everyone appreciates that the government cannot do everything.
How does the government do everything? It just does it by borrowing money which ultimately leads to, as we saw, high inflation, a loss of credibility, spiking interest rates.
I completely acknowledge that trust has been damaged over the past few weeks and months. I realise that trust is not given, trust is earnt. My job is to regain people’s trust.”
Tom Selby, head of retirement policy at AJ Bell, said that under the current rules, defined contribution workplace and personal pensions benefit from generous taxes upon death and that the tax changes would make a significant difference in tackling the UK’s budget deficit. He said:
“If you die before age 75, you can pass on funds tax-free to your nominated beneficiary or beneficiaries.
If you die after age 75, any beneficiaries will be taxed on the money in the same way as income when they make a withdrawal.
The Treasury could introduce a tax charge on death to raise extra revenue from retirees hoping to pass money onto loved ones tax efficiently.”
